Westpac: Belly Will Continue To Underperform

Westpac note that what is "interesting is the fact the curve is bear flattening, rather than bear steepening. Traditionally, it was later in the hike cycle where bear flattening was consistent with the economic and policy outlook. That is, this traditionally occurred once the RBA had moved rates to restrictive levels, rather than at least a year before the first hike in the cycle. In our view, this reflects confidence in the Australian inflation outlook. The same confidence that has seen domestic BEIs underperform rising global counterparts. We expect this to continue to be the case, and so the "belly of the curve" should also continue to underperform over a multi-month timeframe."