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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.
STIR
As we have noted in recent sessions, the repricing in the front end of AUD rates curves has been relatively aggressive, although we are nowhere near a full retrace when it comes to the hike premium embedded into the markets over the last month or so.
- A quick look at the IRZ1/Z2/Z3 butterfly shows that tightening expectations (at least when measured through this metric) remain front loaded, with the IRZ1/Z2 spread continuing to drive the direction of the structure. Note that a modest amount of the hike premium that was previously embedded into that area of the curve has rolled into IRZ2/Z3 this week.
- The market continues to doubt the RBA's view when it comes to '22 rate hikes. A reminder that RBA Governor Lowe explicitly pushed back on market pricing surrounding an early '22 rate hike earlier this week, calling that particular move an overreaction to the firmer than expected underlying Q321 CPI print. The RBA's new forward guidance on the cash rate was purposefully ambiguous, with the follow up address from the Governor pointing to scenarios that may lead to lift off in either '23 or '24.
- Both the 3- & 6-month BBSW fixings have retraced from last week's highs (both hit the highest levels seen since '20), with stability in the local fixed income space, aided by the RBA delivering a relatively dovish outcome come the end of Tuesday's meeting, helping the fixings away from highs.
Fig. 1: IRZ1/Z2/Z3 Butterfly
Source: MNI - Market News/Bloomberg
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
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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