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
“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.”