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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
As highlighted previously, the recent flattening in 1-year swap Vs. 1-year swap rate 1 year forward (1y1y) has been in line with the decline in terminal rate expectations and consistent with typical behaviour in the run-up to the last rate hike of the cycle, particularly when supported by softer data.
- If the RBA pauses today one could expect 1y Vs. 1y1y to steepen into the release of Q1 CPI on 26 April and the RBA’s May meeting, if a favourable CPI print is forthcoming. Beyond that, history would suggest price action is somewhat volatile until there are clearer signs of an easing bias.
- Given the likelihood of volatility 1y Vs. 1y1y, a better play historically on RBA eventually shifting to an easing bias has been to position for a steeper 1y1y Vs. 2y1y. While it tends to offer less upside, it tends to be far less volatile.
- With the market pricing 23bp of easing by year-end, a better entry level for a 1y1y Vs. 2y1y steepener may present itself after today’s RBA decision if an explicit tightening bias is maintained.
Figure 1: Expected Cash Rate Change 1y Fwd. (%) & 1y1y Vs. 2y1y (%)
Source: Bloomberg / MNI - Market News
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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