Australia Rates Alpha: Long AU 2y1y x-mkt vs US, hedge AU data risk with Sep/Dec steepener

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Australia Rates Alpha: Long AU 2y1y x-mkt vs US, hedge AU data risk with Sep/Dec steepener

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Australia Rates Alpha

Long AU 2y1y x-mkt vs US, hedge AU data

risk with Sep/Dec steepener

Trade recommendation 18 June 2026

We recommend receiving AU 2y1y vs paying 2y1y US SOFR, hedged with a Sep/Dec RBA

Rates StrategyOIS steepener ahead of data next week (entry: 36bp, target: 10bp, stop: 50bp,

Australiatimeframe: 3 months). Long 2y1y AU vs US has positive roll of 3bp/ quarter. Risk: strong

AU data next week. Oliver Levingston

FX and Rates Strategist

Further Fed-RBA policy divergence likely Merrill+852 3508Lynch4631(Hong Kong)

We expect AU front-end rates will outperform US rates following hawkish FOMC dot oliver.levingston@bofa.com

plot revisions and communications. See June FOMC: A single mandate 17 June 2026. Our Isabel Hartstein

US rates strategists hold short 2y and 2s10s flattener trade recommendations, and we FXMerrill& RatesLynchStrategist(Australia)

think the RBA could be on hold for an extended period while waiting for trimmed mean +61 2 9226 5868

isabel.hartstein@bofa.com

inflation to return to the target band (vs 15bps of hikes priced to peak cash rates).

RBA: data > jawboning For a list of open trade

Conversely, this week’s RBA decision to hold the cash rate at 4.35% was unanimous and recommendations and trade

the Governor noted that the Board did not even consider the case for a hike. This follows recommendations closed in the last

a run of weaker-than-expected domestic data, in particular a rise in the unemployment 12 months, please see our report,

rate to 4.5%, weak confidence data, as well as a slowing housing market. A rally in AU Global Rates Weekly.

rates following the RBA's decision to leave rates on hold suggests front-end rates will be