relative monetary policy and to a lower extent by carry considerations……while risk aversion dynamic will likely become less relevant in a low vol environment, with an empirical declining beta to risky assets.

The persistent availability of the Fed’s bilateral facilities will prevent the development of funding tension at the short end of the curve, despite uptake remaining low.

Steeper USD money market curve and ex-Fed b/s expansion support modest widening in the intermediate sector, with the front end anchored……although attractiveness of Yankee issuance could limit the richening and offer RV opportunities.

In EUR/USD basis, we tactically receive 4Yx1Y EUR/USD FX/OIS basis on supportive fundamentals, some relative value, and carry considerations. We also highlight that buying USTs and swapping back into EUR using 3M rolling hedges is currently attractive as an alpha generation strategy vs. Bund.

In GBP/USD basis, we tactically pay 10Y GBP/USD OIS basis given relative valuations and an expected decline in GBP cross-border issuance.

In USD/JPY basis, we expect the 3M to remain broadly stable, while we expect the intermediate sector (2-5Y) to gradually tighten. We continue to hold 1Yx1Y/1Yx5Y USD/JPY cross-currency basis curve steepeners.

In SEK/EUR, we pay 2Yx1Y SEK/EUR basis as a short term tactical trade on cross border issuance considerations.

In AUS/USD basis, we continue to receive 2Yx2Y AUD/USD XCCY basis, as the abundance of domestic funding options means domestic banks now have less of a need to access offshore markets.

In NZD/USD basis, while the banking system is flush with liquidity and credit growth is unlikely, the breakout of the recent range, the RBNZ is close to a capacity constrain in its LSAP program and we are becoming skeptical that reserve growth can pick-up much from here. We closed our received NZD/USD 1Y cross-currency position last week given these concerns, but maintain our received 3Yx3Y expression.

On Fundamentals and RV considerations, we recommend to receive 5Y CHF/USD cross currency basis.