Australian/NZ Rates Strategy: Build longs in 5-10 year Australian rates; steepen 10s30s

Research evidence excerpt

Australian/NZ Rates Strategy: Build longs in 5-10 year Australian rates; steepen 10s30s

Global Research

16 June 2026ab

Australian/NZ Rates Strategy Interest Rates

AustralasiaBuild longs in 5-10 year Australian rates; steepen

10s30s Nic Guesnon, CFA

Strategist

nic.guesnon@ubs.com

+61-2-9324 2192

Macro context: RBA holds, policy modestly restrictive, data pulse softening Kieran Kelly

As widely expected, the RBA held today after a series of 3 back-to-back rate hikes in Associate Analyst

2026. Our modelling suggests that the cash rate target at 4.35%, is modestly restrictive, kieran.kelly@ubs.com

+61-2-9324 2107

compared to our estimate of the near-term nominal neutral rate at 4.0%. The pulse

from high frequency data has started softening, especially after the budget's tax

changes. The RBA's reaction function is starting to evolve, although they retain a

'conditional' tightening bias. The major risk for the market is Q2 Trimmed Mean CPI (29

July). But we think the RBA needs an upside surprise to their Q2 trimmed mean forecast

of 1.0% q/q (& 3.8% y/y) to shock markets. Q2 CPI is ahead of the RBA's August 11th

meeting, where around 7bps of hikes are priced; &, a cumulative ~13½bps of hikes by

Dec-26.

RBA Governor cautions the market; but investors are trading the trend

RBA Governor Bullock noted the market pricing had moved lower after softer than

expected recent monthly inflation and labour market data and today's meeting. RBA

Governor Bullock then sent a message to the market: "I wouldn't be jumping on those

numbers quite so firmly… I can't rule out that if inflation doesn't respond in the way we

expect it to, we might have to do more". The market initially sold off, then shrugged it

off. Investors are trading the softer trend in data and now the softer RBA rate guidance