Yields for the AU 10y bond are establishing a range with 3.15% to 3.50% though the October OIS is pricing a 70% chance of a 25bps rate cut. In addition, a steepening in curves has persisted taking 3s10s curves towards the upper end of expected trading range. “In keeping with the tactical position, positive carry trades 2y10y swap may offer better entry level and carry for a short- term flattener.” the Team notes.
“Our target entry level on the 3y EFP was reached and as such the trade has been opened. While any significant widening is unlikely in the absence of a strong rally at an entry level of 65bps we are comfortable holding this trade simply as a hedge against a ‘risk off’ scenario.” they add.