Westpac: Receive Aug ’22 RBA OIS

Westpac note that “while the RBA is likely to come some way toward acknowledging a 2022 rate hike, as we expect, we think that they will not go so far as to confirm market pricing. Indeed there is a risk that the RBA directly contradicts this pricing. How would the market react? The forward cash curve will remain steep and encouraged by the expected shift in RBA guidance, however pricing for an August rate hike is around 30bp higher than our expectations and we think the risks are that they move later not earlier than August. Hence there should be some corrective price action in coming days. We emphasise that this is a tactical trade, as we do not think that there will be a significant revision, especially given the Fed backdrop.”

• The recommendation to receive Aug ’22 RBA OIS was made at 55bp, with a target of 40bp and a stop set at 60bp.