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Rates Strategy Research Hub

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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