After gapping higher at the open.......>

AUSSIE BONDS: After gapping higher at the open Aussie bonds had an uneventful

session. The move higher at the start of Asia trade stemmed from reports of

North Korea launched missiles over Japan to hit the highest levels since

September 2016. Japanese officials say no damage was done but see the test as an

escalation of the North Korea threat. Japanese Foreign Minister has asked the UN

to convene an emergency security council meeting.

- Aussie bond futures jumped around 3 ticks at the open and then 3- & 10-Year

futures both saw 2 tick ranges, YMU7 at 98.03, XMU7 is at 97.38.

- Yields finished lower across the curve, down 3.8-5bp with the curve

steepening. 3-/10-Year spread 0.7bp wider. 

- As a note Morgan Stanley say they expect "Australia: 1y+ ACGB index to extend

by 0.015y in August, lower than average August extension of 0.11y and an average

month's extension of 0.07y." This is being attributed to a semi-government bonds

maturing in September.