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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
AUSSIE SWAPS
Ahead of the RBA Meeting this week, we flagged in 1y1y Offers A Play On A Dovish Shift From The RBA the atypical nature of the 1-year forwards curve with the pre-RBA push higher in terminal rate expectations not being accompanied by a flattening of 1-year swap Vs. 1-year swap rate 1 year forward (1y1y). Historically, the 1y Vs. 1y1y flattens into the last rate hike of the cycle, particularly when supported by softer data.
Fig. 1: 1y Vs. 1y1y & 1y1y Vs. 2y1y
Source: Bloomberg / MNI - Market News
- With the risk (subsequently confirmed) that the RBA could pivot dovishly at the March meeting on the back of recent weak data prints in January Employment, Q4 WPI, Q4 GDP and January Monthly CPI, we noted that a 1y Vs. 1y1y flattener offered a good risk-return play.
- Currently, 1y Vs. 1y1y is around -10bp versus a pre-RBA level of flat. For reference, we noted previously that a similar steepening in 1y Vs. 1y1y in December gave way to a 65bp+ flattening in January. With the all-important but often volatile Employment release on Thursday, the 1y Vs. 1y1y continues to offer a lower-risk way of playing RBA data dependency.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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