Interest in AUD rates running at a below-average pace - Nomura

Andrew Ticehurst, Research Analyst at Nomura explains that with the Reserve Bank of Australia (RBA) widely expected to keep the cash rate unchanged for some time, they found that interest in AUD rates was running at a below-average pace, which in turn suggests that positioning in AUD rates from US is currently relatively light.

Key Quotes

“Moreover, investors did not seem to be expressing a lot of risk globally – and many expressed some frustration at the low level of market volatility this year. That said, most agreed with our cautious Australian macro outlook and a good number viewed the front half of the AUD curve as being relatively attractive, particularly against short positions in US rates. A number of investors may be running long NZD versus short AUD rates positions, leaving us a little cautious given potential liquidity issues in NZD rates should investors seek to unwind these positions at the same time.”