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BTP TECHS

(U1) Uptrend Extends

GILT TECHS

(U1) Clears Resistance

SCHATZ TECHS

(U1) Bullish Price Sequence

ASIA RATES

Mostly Higher As EM Risk Off Continues

BOBL TECHS

(U1) Trades Through Its Bull Channel Top

ASIA FX

Delta Variant Concerns Weigh

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RBC recommend receiving Australian 1Y1Y swaps vs. U.S. at current levels with a target of -20bp, stop at 6bp.

  • "Markets have moved aggressively to price in RBA hikes following a more hawkish sounding Fed last week, and sequential strong Australian labour force reports. We think RBA pricing has gone too far in the near term however, with the ~2 hikes fully priced by mid-2023 looking too aggressive. We don't expect any hikes from the RBA through to end-2022 (our current forecast horizon), and even allowing for a chance of hikes in 2023, we think this pricing doesn't capture enough of the risk that wage/inflationary pressures in Australia continue to lag."
  • "This contrasts sharply with our U.S. view that Fed rate hikes beginning in 2022 are a very realistic proposition. Hence, we think that while markets have pulled AUD swaps almost in line with the USD curve, this is unjustified as there's likely to be a large policy lag from the RBA. We prefer to receive here at the front end of the curve to keep the trade very policy-rate focused, keeping it focused on the timing of the start of future rate-hike cycles."