A rapidly improving New Zealand economic picture has elevated New Zealand bond rates above Australia’s by the widest margin in almost 12 months, spearheading a global bond-sell off in response to a more upbeat outlook.

The Australian dollar was trading at US76.28¢ on Thursday, up 0.1 per cent, and threatening a 2018 high. The 10-year government bond yield rose to 1.2 per cent for the first time since March; New Zealand 10-year bond yields are at 1.35 per cent.

The RBA surprised the markets on Tuesday by committing to buy another $100 billion of bonds over six months and locked in its forward guidance on rates at 0.1 per cent to help lower unemployment and lift inflation.

Governor Philip Lowe this week underscored that the RBA is buying bonds with an eye to keeping the Australian dollar from rising too high. But as New Zealand has shown, the market will ignore policymakers’ intentions when it sees evidence of improvement.

“It is clear that the bond purchase program has helped to lower interest rates and has meant that the Australian dollar is lower than it otherwise would have been. So, it has worked,“ Dr Lowe said on Wednesday.

But economists say it’s hard to know.

Read more about the rise in bond yields here.