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JGB TECHS

(Z1) Bearish Trend Condition

AUSSIE 10-YEAR TECHS

(Z1) Bearish Price Sequence

AUSSIE 3-YEAR TECHS

(Z1) Off Recent Highs

US 10YR FUTURE TECHS

(Z1)‌‌ Support Appears Exposed

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  • In the most recent focus survey, inflation forecasts continue to be revised higher, filtering through to an increase to 2021 year-end Selic rate as seen below:
    • Brazil economists forecast 6.56% 2021 inflation; prior 6.31% (BBG)
    • Brazil economists forecast 3.80% 2022 inflation; prior 3.75% (BBG)
    • Brazil economists see 7% 2021 year-end Selic; prior 6.75% (BBG)
  • Swap rates experienced heightened volatility on Friday after an above-estimate July bi-weekly CPI. The 8.59% headline annual print served as trigger for traders to push the curve significantly higher severely weighing on bets that inflation was slowing down.
  • DI contract expiring in Jan 2022 rose 23 bps, a huge rise for such a short maturity. Contract expiring in 2023 rose 28 bps. This gives a clear indication that the more aggressive Selic move next week is the main bet among traders.
    • Digital options traded at B3 now show 60% odds of a 100bps hike versus 37% last Friday.
  • For reference, the August Copom rate decision/statement takes place next Wednesday, August 4.