1/2: A few trade recommendations.......>

AUSSIE BONDS: 1/2: A few trade recommendations from J.P.Morgan: "This week the

RBA Governor delivered a speech titled "An Economic and Financial Update". The

speech was important because it provided a first glimpse at the RBA's new

economic forecasts, post COVID-19. The Bank expects a contraction in output of

10% in 1H20 and a rise in the unemployment rate to 10% in June. These estimates

are very similar to the J.P. Morgan forecasts. The Governor also provided a

sobering assessment of the medium-term prospects for the economy, noting that

the unemployment rate will remain above 6% for some time. This is consistent

with the economy running a negative output gap well into 2022, and underscores

why both monetary and fiscal policy will remain accommodative for some time.

Against this backdrop, and given the RBA's strong commitment to 1) low yields

for a number of years and 2) a 3Y yield target, we find it striking that the

forward ACGB curve is so steep. We therefore recommend entering ACGB 2s/5s

flatteners."