RBC Europe Limited RBC Europe Limited

Gordon Scott Cathal Kennedy

Associate European Economist
+44 (0)20 7653 4576 +44 (0)20 7029 0133
gordon.scott@rbccm.com cathal.kennedy@rbccm.com

August 17, 2021 All values in GBP unless otherwise noted.

Priced as of prior trading day’s

RBC European Rates & Economics Daily market close (unless otherwise
stated)
Level Chg**
 Overnight news: UK unemployment rate falls; RBA minutes leave space for tapering Fixed Income
U-turn; NZD falls following discovery of coronavirus case TYU1 134.38 0.05
 Data and events: Euro area Q2 GDP 2nd estimate; US retail sales; Fed Chair Powell speaks RXU1 176.82 0.02
G U1 129.80 0.13
 Gilt market outlook: 0s46 auction preview 2y UST 0.21% 0bp
 Gilt market ‘free float’ table and APF eligibility calendar: Exhibits 3 & 4 5y UST 0.74% -2bp
10y UST 1.25% -2bp
Overnight news: APAC equities traded mostly lower overnight following the publication of 30y UST 1.91% -2bp
draft rules by Chinese regulators aimed at tackling unfair competition in the online sector. 2y Schatz* -0.74% 0bp
The Hang Seng, CSI 300 and S&P/ASX 200 fell 1.5%, 1.4% and 0.9% respectively while the 5y OBL* -0.73% 0bp
10y Bund* -0.47% 0bp
Nikkei was down just 0.2%. US and European equity futures were modestly lower after the 30y Bund* -0.02% 0bp
S&P 500 closed cash trading up 0.3%. 10y US treasury yields fell 2bp in Asian trading to trade 2y Gilt* 0.14% 1bp
at 1.24%. The Bloomberg Dollar Spot Index rose 0.2% with the New Zealand dollar seeing a 5y Gilt* 0.30% 1bp
10y Gilt* 0.57% 0bp
large decline (see below).
30y Gilt* 0.96% 0bp
10y SP-GE* 69bp 1bp
UK labour market data showed the UK unemployment rate falling to 4.7% in June, from 4.8% 10y IT-GE* 103bp 2bp
in May (consensus 4.8%). Employment rose 95k in the three months to the end of June, 10y FR-GE* 35bp 1bp
roughly in line with consensus expectations (100k). Money Markets
EONIA -0.484% 0bp
1y1y EONIA -0.49% 0bp
Boston Fed President Eric Rosengren (non-voter) said that if labour market data continued to ERU1 -0.55% 0bp
hold up he would be in favour of announcing a taper of the Fed’s QE programme in SONIA 0.05% 0bp
September. Rosengren said that tapering itself should begin no later than December and 1y SONIA 0.29% 0bp
L U1 0.08% 0bp
potentially as early as October or November, with the process of tapering being completed by
Currencies
the middle of next year. EUR/USD 1.1770 -0.001
GBP/USD 1.3826 -0.002
While much of the RBA meeting minutes, published overnight, was stale given the GBP/EUR 1.1746 -0.001
deteriorating coronavirus picture, the key sentence in the final paragraph leaned dovish. The Equities & commodities
S&P500 4,480 12
RBA suggested that it “would be prepared to act in response to further bad news on the Dow 35,625 110
health front should that lead to a more significant setback for the economic recovery.” Our Euro Stoxx 4,202 -27
Australian colleagues note that in the light of the worsening coronavirus situation this gives FTSE100 7,154 -65
the RBA some optionality to U-turn on tapering in the run up to the September meeting. They Nikkei 27,494 -30
Oil (CO1) $69.49 -0.02
note that key to this decision will be the RBA’s medium term outlook, in particular 2022. Gold $1,791.60 4.16
While a September start to tapering remains our Australian colleagues’ base case, the risks of VIX 16.12 0.67
delay to tapering are rising. * Chg as of T-2 COB
** Chg as of T-1 COB
Levels as of Aug 17 06:58 BST
Source: Bloomberg

Region BST Period Data/Event RBC Consensus Prior

Netherlands 08:30 2Q GDP q/q, y/y (%) 1.5, … -0.8, -2.4
Euro area 10:00 Jun Construction output m/m, y/y (%) 0.9, 13.6
Euro area 10:00 2Q Employment q/q, y/y (%) -0.3, -1.8
Euro area 10:00 2Q GDP q/q, y/y % (previous est. 2.0, 13.7) 2.0, 13.7 2.0, 13.7 -0.3, -1.3
Canada 13:15 Jul Housing starts (k) 280 280.0 282.1
US 13:30 Jul Retail Sales Advance, Ex Auto m/m (%) -0.2, 0.3 -0.2, 0.2 0.6, 1.3
US 13:30 Jul Retail Sales Control Group m/m (%) 0 -0.2 1.1
US 14:15 Jul Industrial Production m/m (%) 0.4 0.5 0.4
US 14:15 Jul Capacity Utilization (%) 75.8 75.7 75.4
US 18:30 Fed Chair Powell speaks
US 20:45 Fed's Kashkari speaks
Sources: Bloomberg, Reuters and RBC Capital Markets

This report has been produced by the entity identified on this page immediately above the analyst's name.
This entity is a non-US broker-dealer that is not registered with FINRA. RBC Capital Markets is the
marketing name used by Royal Bank of Canada subsidiaries, including the entity responsible for this report.
For Required Conflicts Disclosures, see page 8
Disseminated: Aug 17, 2021 02:29EDT; Produced: Aug 17, 2021 02:29EDT
 RBA minutes leave space for tapering U-turn

Exhibit 1: 10s30s steepened into yesterday’s close, although Exhibit 2: 0s46s look relatively attractive on 1Q41-0s46-0f50
remaining at very flat levels following recent moves (bps) fly despite outperforming over recent sessions (bps)

70 7.5

65 7

60 6.5
6
55
5.5
50
5
45
4.5
40 4
35 3.5
30 3
Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21
Sources: Bloomberg, RBC Capital Markets Sources: Bloomberg, RBC Capital Markets

The New Zealand dollar fell 1% against the US dollar following the discovery of a coronavirus
case in Auckland, the first such “community” case since February.

US SEC Chair Gary Gensler warned of the risks for US investors of investing in US listed
Chinese companies and noted that he’d asked for the regulator to “take a pause for now” in
approving IPOs of shell companies many Chinese firms use to list in the US.
Data and events: We don’t expect today’s second estimate of euro area Q2 GDP to see any
major changes from the first estimate, which showed the euro area economy growing 2.0%
q/q. A first look at the Q2 GDP data for the Netherlands is also published this morning
Country level releases suggest euro area construction output fell 2.1% m/m in June, with
large contractions seen in Germany (-2.6%), France (-2.0%) and Spain (-3.6%). A monthly print
in line with our expectations, would suggest that the euro area construction sector, which
comprises 5% of euro area GVA, expanded 1.5% q/q in Q2.
Our US colleagues expect a decline in headline US retail sales for July (-0.2%), in large part
reflecting a large slowing in auto sales, which have struggled over the last couple of months
on inventory challenges. Excluding autos, retail is likely to post a modest gain (+0.3%), but
where it counts, namely retail control, a flat outcome is likely. The recent rise in coronavirus
cases mean that spending data over the next couple of months is likely to be soft. However, if
estimates that case counts should be on the downside by Labor Day are accurate, September
should represent a sharp bounceback month.
Fed Chair Jerome Powell participates in a virtual town hall with teachers and students.
Separately Minneapolis Fed President Neel Kashkari (non-voter) speaks at a town hall event
at the Pacific Northwest Economic Regional Annual Summit.
UKT 0.875% Jan-46 (0s46) preview: The DMO will seek to sell £2.0bn nominal in the UKT
0.875% Jan-46 (0s46) conventional gilt, taking the nominal amount outstanding on the bond
to £15.0bn, excluding any post auction proceeds. The bond was first issued via syndication on
19 January and was last tapped on 2 June. The bond will not be tapped further this quarter, as
per the DMO’s auction calendar (see our take here). The DMO’s auction calendar for Oct-Dec
will be published on 31 August, however the DMO’s quarterly consultation agenda published
yesterday suggests that auction supply will be skewed more to the long-end relative to the
current quarter (up-to 8 long auctions versus 6 in July-Sep), with 0s46s tapped at least once.
Since the last tap, which was over 2 months ago, the APF has purchased £1.67bn nominal of
the bond and hence taken-up most of the stock issued. This has likely left the Street short of

August 17, 2021 2

 RBA minutes leave space for tapering U-turn

inventory and hence should bode well for today’s event. Furthermore, this afternoon’s long
APF operation should provide support for the long-end, even though 0s46s will not be eligible.
Following the sharp global FI rally, from mid-May all the way through to the end of July, gilt
yields appear to have stabilised around current levels in August, with 25y yields trading in the
0.95% to 1.05% range. Having rallied over the past 2 sessions, 25y yields now sit at 0.99%,
46bps lower than its YTD highs printed in mid-May. Growing concerns regarding the Delta
variant and its impact on growth globally in a backdrop where most major central banks are
turning up their hawkish rhetoric should continue to support the long-end for the time being.
Furthermore, the demand/supply outlook for the UK long-end until the end of September will
also be supportive of the sector, although that may not be the case next quarter. Following
the publication of the DMO’s quarterly consultation agenda yesterday, 10s30s reversed all the
flattening seen earlier in the session. Despite this, following the aggressive flattening move
seen over the past 6 weeks, the 10s30s remains at its flattest levels since last May (Exhibit 1).
25y gilts are also trading near historically rich levels versus the swaps curve, although it did
also cheapen here following the publication of the consultation agenda.
Cross-market, the 25y gilt-bund spread has been widening over the course of July and August,
although it has tightened around 1.5bps during the rally over the past 2 sessions.
On micro-RV, the bond has been richening versus its reference bond 3H45 during the global FI
rally over recent months and now trades at a spread of 3H45 + 2.8bps, almost in line with
where it was initially auctioned. Furthermore, versus its direct neighbours, it has been
outperforming over the same timeframe and doesn’t look to offer much value at these levels
on the 3H45-0s46-4Q46 fly. Where the bond does look somewhat attractive is on the 1Q41-
0s46-0f50 fly. Whilst it has outperformed since touching its cheapest levels last Thursday,
there does appear to be more room for performance based on its short trading history
(Exhibit 2).
In conclusion, despite the rich metrics on outright, the curve and on ASW, we have seen some
concessions on all these metrics heading into yesterday’s close which should be supportive.
Furthermore, given the APF buying of the bond since the last tap, the Street appears to be
short inventory on the bond and hence this should also bode well for today’s event. The long-
APF operation this afternoon will also provide a positive contribution.

August 17, 2021 3

 RBA minutes leave space for tapering U-turn

Exhibit 3: Gilt market ‘free float’ table

L = K * (Dirty price /
s B C D E F G=E-F H I=H/G J=G-H K = (70% - I ) * G
100)
Remaining
Remaining APF
Total Government APF APF Free float APF purchases
Free float, purchases before
Yield to Par/Par Years to nominal holdings, holdings, holdings as excluding before APF
Gilt £bn, APF holds 70% of
maturity, % ASW, bps maturity outstanding, £bn, £bn, % of free APF, £bn, holds 70% of
nominal free float, £bn, mkt
£bn nominal nominal float nominal free float, £bn,
value
nominal
Updated: 16-Aug-21 16-Aug-21 16-Aug-21 16-Aug-21 16-Aug-21 16-Aug-21
3T21 -0.02 -7.0 0.06 29.0 2.1 26.9 14.3 53.3% 12.6 4.5 4.6
4%22 0.02 -5.7 0.56 38.8 2.7 36.0 25.1 69.6% 10.9 0.1 0.1
0H22 0.08 -4.4 0.93 29.3 0.6 28.6 3.2 11.2% 25.4 16.8 16.9
1T22 0.08 -6.3 1.06 29.7 1.4 28.2 5.9 20.7% 22.4 13.9 14.3
0e23 0.13 -7.8 1.46 33.8 0.0 33.8 - 0.0% 33.8 23.6 23.6
0T23 0.12 -14.5 1.93 33.7 0.6 33.1 14.0 42.2% 19.1 9.2 9.3
2Q23 0.13 -15.0 2.06 35.3 1.3 34.0 19.7 57.9% 14.3 4.1 4.3
0e24 0.20 -10.6 2.46 34.1 0.0 34.1 2.9 8.5% 31.2 21.0 20.9
1%24 0.17 -16.2 2.68 34.2 0.4 33.8 19.6 58.0% 14.2 4.1 4.2
2T24 0.19 -16.8 3.06 34.4 1.0 33.4 23.5 70.5% 9.8 (0.2) (0.2)
0Q25 0.25 -12.8 3.46 4.2 - 4.2 3.0 70.9% 1.2 (0.0) (0.0)
5%25 0.21 -18.3 3.56 35.8 8.2 27.6 19.0 68.8% 8.6 0.3 0.4
0F25 0.22 -17.7 3.81 41.4 0.3 41.1 27.6 67.1% 13.5 1.2 1.2
2%25 0.23 -18.2 4.06 38.3 0.9 37.4 26.2 70.1% 11.2 (0.0) (0.0)
0e26 0.29 -13.1 4.46 33.9 0.0 33.9 16.9 50.0% 16.9 6.8 6.7
1H26 0.29 -15.4 4.93 41.9 0.8 41.1 28.8 70.0% 12.3 (0.0) (0.0)
0r26 0.36 -8.3 5.18 16.6 0.0 16.6 4.5 27.5% 12.0 7.05 7.1
1Q27 0.36 -11.3 5.93 39.3 0.5 38.8 25.3 65.2% 13.5 1.8 1.9
4Q27 0.37 -11.2 6.31 31.7 6.3 25.3 17.6 69.6% 7.7 0.1 0.1
0e28 0.42 -6.5 6.46 29.8 0.0 29.8 13.9 46.7% 15.9 6.9 6.8
1F28 0.42 -7.8 7.18 36.3 0.5 35.8 23.5 65.7% 12.3 1.55 1.7
6%28 0.45 -4.9 7.31 19.4 6.0 13.4 8.9 66.2% 4.5 0.51 0.7
0s29 0.51 -1.3 8.18 41.9 0.3 41.6 28.5 68.6% 13.0 0.57 0.6
0r30 0.59 4.4 9.18 37.3 0.0 37.3 22.6 60.6% 14.7 3.50 3.4
4T30 0.56 3.9 9.31 41.1 5.7 35.4 24.9 70.4% 10.5 (0.15) (0.2)
0Q31 0.65 8.9 9.95 33.3 0.0 33.3 9.1 27.2% 24.3 14.28 13.7
4Q32 0.66 12.3 10.81 38.7 8.6 30.1 21.1 70.1% 9.0 (0.03) (0.0)
4H34 0.75 20.9 13.06 34.8 2.1 32.7 22.9 70.0% 9.8 (0.01) (0.0)
0F35 0.84 22.8 13.95 33.4 0.0 33.4 9.5 28.5% 23.9 13.9 13.5
4Q36 0.80 25.1 14.56 30.4 7.4 23.0 13.9 60.4% 9.1 2.20 3.3
1T37 0.88 28.1 16.06 30.7 0.4 30.2 9.7 32.2% 20.5 11.44 13.0
4T38 0.86 33.2 17.31 25.7 7.3 18.5 11.3 61.3% 7.2 1.62 2.6
1e39 0.94 31.8 17.46 7.0 - 7.0 0.4 6.1% 6.6 4.47 4.6
4Q39 0.88 35.3 18.06 23.3 1.6 21.6 10.6 48.9% 11.0 4.56 7.2
4Q40 0.91 39.1 19.31 25.4 1.9 23.5 10.6 45.4% 12.8 5.8 9.2
1Q41 0.95 33.1 20.18 32.5 0.0 32.4 8.2 25.3% 24.2 14.5 15.3
4H42 0.92 43.0 21.31 27.2 6.1 21.1 8.8 41.5% 12.4 6.0 10.2
3Q44 0.95 42.3 22.43 27.9 1.2 26.7 7.4 27.7% 19.3 11.3 16.5
3H45 0.95 44.0 23.44 28.2 1.0 27.3 8.8 32.5% 18.4 10.2 15.7
0s46 0.98 36.2 24.46 13.0 0.0 13.0 4.3 33.4% 8.7 4.8 4.7
4Q46 0.95 49.3 25.31 24.1 5.8 18.4 7.7 42.1% 10.6 5.1 8.9
1H47 0.96 37.9 25.93 24.7 0.5 24.2 6.2 25.6% 18.0 10.7 12.1
1T49 0.95 39.3 27.44 29.0 0.2 28.8 18.0 62.5% 10.8 2.2 2.6
4Q49 0.93 49.8 28.31 20.2 2.9 17.3 7.8 45.2% 9.5 4.3 7.9
0F50 0.95 34.6 29.18 30.6 0.0 30.6 18.6 60.7% 12.0 2.9 2.6
1Q51 0.96 39.4 29.95 10.0 - 10.0 1.6 16.3% 8.4 5.4 5.8
3T52 0.93 49.2 30.93 24.1 1.4 22.8 11.7 51.4% 11.1 4.2 7.4
1F54 0.92 40.4 33.18 23.6 0.1 23.5 9.9 42.2% 13.6 6.5 7.9
4Q55 0.89 50.6 34.31 26.6 6.1 20.5 10.1 49.5% 10.3 4.2 8.4
1T57 0.88 38.8 35.93 29.5 0.4 29.1 11.1 38.2% 18.0 9.3 11.8
4%60 0.84 48.6 38.43 24.1 1.6 22.5 11.9 53.2% 10.5 3.8 7.7
0H61 0.82 30.9 40.18 18.4 0.0 18.4 5.4 29.4% 13.0 7.5 6.7
2H65 0.82 43.8 43.93 19.7 0.5 19.2 5.0 25.9% 14.2 8.5 13.8
3H68 0.80 50.2 46.93 19.9 0.8 19.1 4.8 25.2% 14.3 8.6 17.6
1F71 0.74 35.7 50.18 20.4 0.2 20.2 10.8 53.5% 9.4 3.3 4.6

Ineligible due to lack of free float or amount outstanding less than £4bn =
Ineligible due to bond being auctioned =

Sources: DMO, Bank of England, Bloomberg, RBC Capital Markets

August 17, 2021 4

 RBA minutes leave space for tapering U-turn

Exhibit 4: APF eligibility calendar for August/September

August September
16-Aug-21 23-Aug-21 30-Aug-21 06-Sep-21 13-Sep-21 20-Sep-21
16-Aug 17-Aug 18-Aug 23-Aug 24-Aug 25-Aug
30-Aug 31-Aug 01-Sep 06-Sep 07-Sep 08-Sep 13-Sep 14-Sep 15-Sep 20-Sep 21-Sep 22-Sep
2T24 2T24 2T24 2T24 2T24 2T24
2T24 2T24 2T24 2T24
New25s New25s New25s New25s New25s New25s
New25s New25s New25s New25s New25s New25s New25s New25s New25s New25s New25s New25s
5%25 5%25 5%25 5%25 5%25 5%25
5%25 5%25 5%25 5%25 5%25 5%25 5%25 5%25 5%25 5%25 5%25 5%25
0F25 0F25 0F25 0F25 0F25 0F25
0F25 0F25 0F25 0F25 0F25 0F25 0F25 0F25 0F25 0F25 0F25 0F25
2%25 2%25 2%25 2%25 2%25 2%25
2%25 2%25 2%25 2%25 2%25 2%25 2%25 2%25 2%25 2%25 2%25 2%25
Short

0e26 0e26 0e26 0e26 0e26 0e26

0e26 0e26 0e26 0e26 0e26 0e26 0e26 0e26 0e26 0e26 0e26 0e26
1H26 1H26 1H26 1H26 1H26 1H26
1H26 1H26 1H26 1H26 1H26 1H26 1H26 1H26 1H26 1H26 1H26 1H26
0r26 0r26 0r26 0r26 0r26 0r26
0r26 0r26 0r26 0r26 0r26 0r26 0r26 0r26 0r26 0r26 0r26 0r26
1Q27 1Q27 1Q27 1Q27 1Q27 1Q27
1Q27 1Q27 1Q27 1Q27 1Q27 1Q27 1Q27 1Q27 1Q27 1Q27 1Q27 1Q27
4Q27 4Q27 4Q27 4Q27 4Q27 4Q27
4Q27 4Q27 4Q27 4Q27 4Q27 4Q27 4Q27 4Q27 4Q27 4Q27 4Q27 4Q27
0e28 0e28 0e28 0e28 0e28 0e28
0e28 0e28 0e28 0e28 0e28 0e28 0e28 0e28 0e28 0e28 0e28 0e28
1F28 1F28 1F28 1F28 1F28 1F28
1F28 1F28 1F28 1F28 1F28 1F28 1F28 1F28 1F28 1F28 1F28 1F28
6%28 6%28 6%28 6%28 6%28 6%28
6%28 6%28 6%28 6%28 6%28 6%28 6%28 6%28 6%28 6%28 6%28 6%28
New29s New29s New29s New29s New29s New29s New29s New29s New29s New29s
0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29 0s29
0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30 0r30
4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30 4T30
Medium

0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31 0Q31
4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32 4Q32
4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34 4H34
0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35 0F35
4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36 4Q36
1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37 1T37
Gilts

4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38 4T38
New39s New39s New39s New39s New39s New39s New39s New39s New39s New39s New39s New39s New39s New39s New39s New39s New39s New39s
4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39 4Q39
4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40 4Q40
1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41 1Q41
4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42 4H42
3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44 3Q44
3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45 3H45
0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46 0s46
4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46 4Q46
1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47 1H47
1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49 1T49
4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49 4Q49
Long

0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50 0F50
1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51 1Q51
3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52 3T52
1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54 1F54
4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55 4Q55
1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57 1T57
4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60 4%60
0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61 0H61
2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65 2H65
3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68 3H68
1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71 1F71

Ineligible due to lack of free float or amount outstanding < £4bn =

Ineligible due to bond being auctioned =
Day of bond auction =

Sources: DMO, Bank of England, Bloomberg, RBC Capital Markets

August 17, 2021 5

 RBA minutes leave space for tapering U-turn

RBC Economics and Rates Forecasts

Exhibit A: RBC growth and inflation forecasts
2021 2022 Y/Y
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2021 2022
US
Growth (q/q saar %) 6.3 6.5 8.4 7.2 1.9 1.9 2.1 2.0 6.5 4.0
Inflation (average %y/y) 1.8 3.9 4.2 3.8 3.4 2.7 2.2 2.0 3.4 2.6
Euro area
Growth (q/q %) -0.3 2.0 1.9 1.2 0.6 0.4 0.4 0.4 4.8 3.6
Inflation (average %y/y) 1.1 1.8 2.3 2.7 2.0 1.5 1.2 1.4 2.0 1.5
UK
Growth (q/q %) -1.5 4.6 2.7 1.9 0.7 0.4 0.4 0.4 7.0 5.3
Inflation (average %y/y) 0.6 1.8 1.9 2.3 2.0 1.8 1.8 1.8 1.7 1.9
Canada
Growth (q/q saar %) 5.6 2.5 8.0 6.0 3.0 3.0 2.5 1.8 6.3 4.0
Inflation (average %y/y) 1.4 3.3 3.5 3.5 2.8 2.1 2.2 2.4 3.0 2.4
Australia
Growth (q/q %) 1.8 0.6 -1.2 1.1 1.5 0.7 0.5 0.4 4.3 2.7
Inflation (average %y/y) 1.1 3.8 3.0 2.7 2.6 2.3 2.2 2.2 2.6 2.4

Exhibit B: RBC yield forecasts

USD 16-Aug Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 CAD 16-Aug Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22
Fed Funds Mid 0.125 0.130 0.130 0.130 0.130 0.130 0.380 BoC rate 0.25 0.25 0.25 0.25 0.25 0.50 0.75
3m T-bill 0.05 0.01 0.05 0.05 0.10 0.25 0.60 3m CTB 0.18 0.20 0.20 0.25 0.30 0.55 0.80
2y TSY 0.21 0.30 0.45 0.60 0.80 1.00 1.20 2y CAN 0.44 0.50 0.60 0.70 0.85 1.05 1.20
5y TSY 0.77 0.95 1.20 1.30 1.45 1.60 1.80 5y CAN 0.83 1.05 1.20 1.35 1.45 1.55 1.65
10y TSY 1.27 1.55 1.75 1.85 2.00 2.10 2.20 10y CAN 1.19 1.40 1.70 1.80 1.90 1.95 2.00
30y TSY 1.93 2.15 2.30 2.40 2.50 2.55 2.55 30y CAN 1.75 1.90 2.10 2.20 2.25 2.30 2.30

EUR 16-Aug Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 GBP 16-Aug Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22

ECB Depo rate -0.50 -0.50 -0.50 -0.50 -0.50 -0.50 -0.50 BoE rate 0.10 0.10 0.10 0.10 0.25 0.25 0.50
3m EONIA -0.49 -0.55 -0.55 -0.55 -0.55 -0.55 -0.55 3m SONIA 0.05 0.05 0.05 0.05 0.20 0.20 0.45
2y Schatz -0.74 -0.60 -0.60 -0.60 -0.60 -0.55 -0.50 2y Gilts 0.15 0.10 0.10 0.15 0.25 0.35 0.50
5y OBL -0.72 -0.55 -0.50 -0.50 -0.45 -0.40 -0.30 5y Gilts 0.31 0.35 0.45 0.50 0.65 0.75 0.85
10y Bund -0.46 -0.20 -0.15 -0.05 0.05 0.15 0.20 10y Gilt 0.59 0.75 0.85 1.00 1.15 1.20 1.35
30y Bund -0.01 0.45 0.55 0.65 0.75 0.80 0.85 30y Gilt 0.97 1.20 1.35 1.65 1.75 1.80 1.90
2y ASW 25 30 30 30 30 30 30 2y ASW 35 30 25 20 20 20 15
5y ASW 35 25 25 25 25 25 25 5y ASW 41 35 30 25 20 20 15
10y ASW 36 30 30 30 30 30 30 10y ASW 26 15 10 10 10 10 5
30y ASW 22 5 5 5 5 5 5 30y ASW -9 -15 -20 -20 -20 -20 -25

AUD 16-Aug Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 NZ 16-Aug Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22

RBA Rate 0.10 0.10 0.10 0.10 0.10 0.10 0.10 RBNZ Rate 0.25 0.25 0.50 0.75 1.00 1.00 1.00
3m Bank Bill 0.02 0.02 0.02 0.02 0.02 0.02 0.02 3m Bank Bill 0.67 0.50 0.75 0.90 1.10 1.10 1.10
2y TSY 0.04 0.10 0.10 0.10 0.10 0.40 0.50 2y Swap 1.37 0.90 1.00 1.10 1.20 1.30 1.35
5y TSY 0.59 0.90 0.95 1.00 1.05 1.25 1.50 5y Swap 1.69 1.50 1.60 1.65 1.80 1.90 1.90
10y TSY 1.16 1.50 1.65 1.85 2.00 2.15 2.30 10y Swap 2.00 1.80 1.95 2.00 2.15 2.25 2.40
Sources: Bloomberg, RBC Capital Markets

August 17, 2021 6

 RBA minutes leave space for tapering U-turn

Exhibit C: US policy rate forecasts Exhibit D: Euro area policy rate forecasts

0.40
0.35 -0.41
0.30 -0.43
0.25 Spot EONIA
Current fed funds -0.45 and meeting
0.20 RBC fed funds mid point
mid point -0.47 dated forwards
0.15 forecast
0.10 -0.49
0.05 -0.51
Spot OIS and FOMC
0.00 Current depo rate
dated forwards RBC depo rate forecast
-0.05 -0.53
-0.10 -0.55
Aug-21 Dec-21 Apr-22 Aug-22 Dec-22 Aug-21 Dec-21 Apr-22 Aug-22 Dec-22

Exhibit E: UK policy rate forecasts Exhibit F: 5 day change in meeting dated OIS forwards

4.0
0.55 3.0
RBC Bank Rate forecast
0.45 2.0
1.0
Spot SONIA and
0.35 0.0
MPC dated
-1.0
0.25 forwards
-2.0
Current Bank Rate -3.0
0.15
-4.0
0.05 -5.0
-0.05 -6.0
Aug-21 Nov-21 Feb-22 May-22 Aug-22 Nov-22 Feb-23 May-23
-0.15
Aug-21 Dec-21 Apr-22 Aug-22 Dec-22 ECB BoE FOMC

RBC RV Quadrant
Exhibit G: Gilt RV quadrant chart, 30d yield butterfly z-score, with asset swap butterfly indicator, bp *

3
Gilt CHEAP Date: 16-Aug-21 Cheap Bonds
to near 4Q46
neighbours
relative to 0e23
recent 2 4Q49
history
0H22
0T23 4T38 4Q40
0r26
1%24
4T30 1F28
1 2T24
1T57
Yield Z Score Indicator

2Q23 2%25 3Q44 0e26 1Q51

3T52 4H34
4Q36 6%28 4Q27 1F54
4%60
0 4Q32 3H45 0r30
0F25 4Q39
0s29
1Q27 0Q31 1T37
5%25 0e24
4H42 0Q25
4Q55 0s46
-1 1H26 0F50
1T22 0F35

Gilt RICH to 0e28

near 1H47 1T49 1Q41
neighbours -2 0H61
relative to
recent history

Rich Bonds
-3
-7 -5 -3 -1 1 3 5 7
Asset swap butterfly spread indicator, bp
Gilt RICH to near neighbours on asset swap Gilt CHEAP to near neighbours on asset swap

Sources: Bloomberg, RBC Capital Markets; *See here (pp.15-19) for details on how the RV Quadrant is calculated

August 17, 2021 7

 RBA minutes leave space for tapering U-turn

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August 17, 2021 8

 RBA minutes leave space for tapering U-turn

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August 17, 2021 9

 RBA minutes leave space for tapering U-turn

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August 17, 2021 10

Global Macro, Economics & Rates Strategy Research Team 
Europe       
RBC Europe Limited: 
Cathal Kennedy  European Economist  +44 20 7029 0133  cathal.kennedy@rbccm.com 
Megum Muhic  Senior Associate  +44 20 7029 0092  megum.muhic@rbccm.com 
Peter Schaffrik  Global Macro Strategist  +44 20 7029 7076  peter.schaffrik@rbccm.com 
Gordon Scott  Associate  +44 20 7653 4576  gordon.scott@rbccm.com 
       

Asia‐Pacific       
Royal Bank of Canada – Sydney Branch: 
Su‐Lin Ong  Head of Australian and New Zealand FIC Strategy  +612‐9033‐3088  su‐lin.ong@rbccm.com 
Robert Thompson  Macro Rates Strategist  +612 9033 3088  robert.thompson@rbccm.com 
       

North America       
RBC Dominion Securities Inc.: 
Simon Deeley  Rates Strategist  (416) 842‐6362  simon.deeley@rbccm.com 
Meika McKelvey  Associate  (416) 842‐2809  meika.mckelvey@rbccm.com 
       

RBC Capital Markets, LLC: 
Tom Porcelli  Chief US Economist  (212) 618‐7788  tom.porcelli@rbccm.com 

Global Commodity Strategy and MENA Research Team 
North America       
RBC Capital Markets, LLC: 
Helima Croft  Head of Global Commodity Strategy and MENA Research  (212) 618‐7798  helima.croft@rbccm.com 
Christopher Louney  Commodity Strategist  (212) 437‐1925  christopher.louney@rbccm.com 
Michael Tran  Commodity Strategist  (212) 266‐4020  michael.tran@rbccm.com 
Megan Schippmann  Senior Associate  (212) 301‐1531  megan.schippmann@rbccm.com 
Brian Leisen  Associate  (212) 437‐9956  brian.leisen@rbccm.com