BOJ Governor Kazuo Ueda Hints at Rate Hike as Inflation Pressures Build 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
ECB Signals Possible Interest Rate Move if Inflation Outlook Fails to Improve 
South Korea Central Bank Signals Inflation Concerns as Oil Prices Surge 
South Korea Central Bank Signals Cautious Policy Amid Inflation and Middle East Tensions 
Bank of England Set to Hold Interest Rates as Inflation Risks and Iran War Impact Loom 
Fed’s Goolsbee Warns Inflation Remains Elevated, Signals Caution on Rate Cuts 
Japan Inflation Expectations Rise as BOJ Rate Hike Timing Faces Uncertainty 
ECB Rate Outlook: Ceasefire Eases Pressure but Hikes Still Expected in 2026 
Long-term hedge against higher rates: ECB is scheduled to deliver monetary policy on 8th September, as EUR long rates have drifted lower and the yield curve has flattened, there is increasing interest in long-term hedges against a scenario of rates eventually moving higher. EUR short and intermediate rates should remain anchored by durably low ECB key policy rate and 4y maturity TLTRO II.
On the other hand, ongoing euro area recovery, increasing headline inflation in the coming months and progressive loosening of the fiscal policy should provide some incentive to protect against a sell-off at the long end of the curve.
EUR long rates are also still being influenced by global factors: any UST sell-off triggered by a hawkish re-pricing of Fed expectations would drive EUR long rates higher, bear steepening the EUR swap curve.
Zero-cost proxy for 1y expiry EUR 3-7y bear-steepener:
Zero-cost proxies for conditional bear steepeners have for long been our preferred hedge against rising rates. The idea is to finance payer spreads in long-maturity rates by selling payers in short or intermediate tails.
The execution:
Buy €50m 1y7y payer ATM
Sell €50m 1y7y payer ATM+35bp
Sell €115m 1y3y payer ATM.
