Australian interest-rate traders have noted a recent surge in activity, after a rate hike two weeks ago attracted greater overseas interest. "The shape of the curve is starting to steepen and opportunities are there--this is putting Australia back on the radar for offshore players," said a senior interest-rate dealer at a domestic bank. He noted volumes in the domestic swap market have picked up by one and a half times since last year on the back of potential rate rises.
Two weeks ago the Reserve Bank of Australia raised the cash rate to 5.75%, the first move since March of last year. This has been driving up greater volatility in rates trading as the market anticipates another increase before December as well as a steeper yield curve in tandem with the U.S. "There's some shape coming into the curve," concurred an official at National Australia Bank, explaining that global hedge funds have been putting on cross-market plays such as against the U.S., as well as yield-curve trades, generally three against 10 years.
