Aussie bonds have operated in a........>

AUSSIE BONDS: Aussie bonds have operated in a narrow range in the early part of

the SFE session, with a decent enough auction being easily digested by

participants, as the bond sold forms part of the 10-Year futures basket, coupled

with the higher yield environment attracting a solid 3.6617 cover (prev.

2.5889).

- Benchmark yields have edged lower on the day, with the AU/US 10-Year spread

last sitting at 3bp. The last time US 10-year yields exceeded Aussie 10-yr

yields was in 1981 a period when AUDUSD fell by nearly 50% (AUDUSD decline 49%

between 1981 and 1986). The AUDUSD cross last sits at 0.7865, with 0.7905

capping for the time-being (the level represents a 38.2% retracement of the

decline from the 0.8136 Jan high).

- Looking to the shorter end, 90-Day bill activity has been listless, with

participants looking to the release of the much-awaited US CPI data on

Wednesday, the latest domestic labour market report on Thursday, and likely

casting an eye over the Tasman with the RBNZ's 2-Year inflation expectations

release due later today.