Australia Inflation Cools as Core CPI Misses Forecasts, Easing RBA Rate Hike Pressure 
China Set to Hold Benchmark Lending Rates Steady for 15th Month 
Chile Central Bank Holds Interest Rate at 4.5% as Inflation and Global Risks Persist 
Fed Minutes Signal Rate Hikes Remain Possible as Inflation Risks Persist 
Eurozone Bond Yields Fall as Oil Slump Eases Inflation Fears Ahead of Central Bank Meetings 
Japan Government Backs Earlier BOJ Rate Hike as Inflation Pressures Build 
Fed Holds Interest Rates Steady as Kevin Warsh Says Rising Treasury Yields Tighten Financial Conditions 
BSP Sees Philippine Inflation Easing, Keeps Policy Options Open 
Singapore Central Bank’s Exchange Rate Policy Explained: Why MAS Uses the S$NEER Instead of Interest Rates 
Brazil Cuts Selic Rate to 14% as Inflation Eases but Risks Persist 
BOJ Rate Decision in Focus as Sticky Inflation, Weak Yen Shape USD/JPY and Nikkei Outlook 
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This week saw a significant shift in Fed rhetoric, seemingly on growing concerns over an overshoot of full employment, leading markets to price in a significantly higher probability of a hike in the next meeting in March and an underperformance in US bonds.
We update our regular positioning indicators and find that investor positioning appears significantly cleaner since end-Jan, suggesting a reduced risk of position unwinds exacerbating market moves in the near term.
In the Euro area, we retain a bias for higher yields and steeper curves in Germany but stay tactically neutral given the speed of the sell-off.
Hold 2Yx2Y/15Yx15Y swap curve steepeners, and 2s/10s weighted bear steepeners. Enter 1Y swap/ Jun17 Bobl bull flatteners. Receive Jun18 ECB OIS. Keep reds/blues weighted bear steepeners and Bund/Buxl swap spread curve flattener.
Enter Jun17 Bund swap spread bear widener. In vol, hold Schatz/Bund vol curve steepener, stay long Jun17 bund gamma via OTM calls, but stop out of long 3Mx10Y gamma.
Intra-Euro area, spreads are tighter on reduced political risk, though we continue to see the tail risk of a Le Pen presidency warranting cheap downside protection. Add short 3Y Netherlands vs. Finland and 2s/10s Italy flattener vs. Germany.
In the UK, We see valuations too rich, and stick with a bearish view: stay short 10Y gilts and hold 1Yx1Y/15Y GBP swap curve steepeners. Enter Jun17/Sep17 Short Sterling steepener boxed against Jun17/Sep17 Euribor flattener and keep reds/greens SONIA curve steepener.
Hold paying 10Yx10Y GBP vs. EUR swaps.
In Japan, receive 1Y USD/JPY cross currency basis, hold longs in the 5s/10s/20s JGB curve fly.
Next week’ key events: ECB, RBA; UK Spring Budget, US nonfarm payrolls.
