Report Type
Rates Strategy
Current global rates strategy reflects a significant divergence in policy trajectories, with New Zealand and Australian markets pricing in hikes to 3.15% and 4.26% while the US Federal Reserve is expected to cut toward a 3.14% floor. In the US, Treasury refunding sizes are currently maintained, but expectations for gradual coupon auction increases starting in late 2026 have led to tightening swap spreads and focused attention on the 2y-7y curve. European bond sentiment remains constructive, highlighted by the Italian-German 10Y spread reaching an 18-year low of 60bp and record demand for Italy’s 15Y bond syndication. Japan’s 30y JGB market faces a complex outlook where historically high yields of 3.635% are balanced against fiscal expansion risks and seasonal demand weakness from insurers. Strategy recommendations in the Japanese sector favor asset swaps to capture carry while hedging against interest rate risk stemming from political catalysts. Globally, fiscal expansion concerns continue to drive yield dynamics, ranging from elevated German 30Y yields to shifting risk premiums between Italian and French sovereign debt ahead of the 2027 elections.
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Monetary Policy Expectations Analysis
This report outlines current market expectations for central bank interest rates across major economies, including New Zealand, Australia, the USA, Eurozone, and Canada.
30-Year JGB Auction Preview
Mizuho previews the upcoming 30y JGB auction, noting that while high yields and future supply reductions are supportive, fiscal risks from the February 8 election create uncertainty. The analyst recommends entering via asset swaps rather than outright positions to mitigate volatility.
1Q26 Treasury Refunding Recap
The US Treasury kept auction sizes unchanged in its 1Q26 refunding and signaled stability for several quarters, though it is evaluating future increases.
30Y JGB Auction Preview: Lower House Election Focus
Mizuho Securities previews the 30y JGB auction, noting that while yields are historically attractive, fiscal risks surrounding the February 8 lower house election suggest a preference for asset swaps over outright longs.
Ever Tighter Spreads for Italian Debt
Italian 10Y bond spreads have tightened to 60bp over Bunds, their lowest since 2008, driven by record demand and a stable ECB rate environment. Analysts suggest spreads could narrow further, potentially overtaking French debt as political risks in France loom.
Rates Spark Tentative Relief
The ECB enters this week's meeting with relief as a potential 'Warsh Fed' and strong US data ease USD pressure. Meanwhile, Italy leverages a positive S&P outlook to launch a new 15-year bond benchmark.