AUD: How High Can 3s Trade? – RBC CM
Research Team at RBC Capital Markets, notes that the Australian 3s have
shifted into higher trading range and will be well supported back
towards cash.
Key Quotes
“Recent history suggests that 3s can test 40bp through (1.35% / 98.65 on
3y futures). We think the risk is skewed towards a follow up June cut
but any disappointment will prove opportune. Accordingly, we continue to
hold our received 3-5-10s.
There is a large index extension at the end of this month. This
typically sees talk of flattening pressure emerge, but we find little
historical relationship between large extensions and curve moves. While
the curve is flattening at the moment, so are curves in global core
fixed income markets.
For investors looking to extend, Nov-20s into Jul-22s and Nov-27s into
Apr-29s are showing up as two of the better micro-extensions on our
metrics.”
