Trade: NOK 3y2y/5y5y Steepener
Rolls to: 44bp (+13bp)
Understandable to see NOK curve flattening in light of revision of inflation target to 2.0%, and hawkish signal from Norges to initiate hiking cycle with a hike by September; pricing however suggests room for more surprise is limited, as NIBOR rates are already above Norges' Forecast as of February.
In addition, NOK already significantly paid in belly vs EUR and SEK for comparison in past 6mths (SEK already steep so maybe comparison vs EUR more noteworthy). NOK 3y2y/5y5y at the flattest side of its 5yrs trading range. Could fade back to 45bp area as price action settles. 3y2y/5y5y reasonably flat vs spot 2s10s, suggesting belly may be extended.
Trade and what it rolls to:
Rec USDCNH 3m fwd, Pay USDCNH 1y fwd
Last: 850 pts
Flat carry until 3m rolls off (calculated as pts/day from both 1y and 3m legs)
Could be an interesting, carry-efficient China hedge, with fwd curve in USDCNH flattening to 2015 tights, if taking a defensive view in light of recent fall in Chinese Credit impulse, LKQ index (composite of rail freight, electricity consumption, loan volume) and fall in PMI. Fall in PMI although seasonally attributed to CNY effects, - still something to consider with broader move lower in Chinese macro data.