Aussie bonds head into the close.......>

AUSSIE BONDS: Aussie bonds head into the close higher, buoyed by a slight miss

in Q2 GDP and following the move higher in US tsys as North Korean geopolitical

worries persist and the debt limit looms.

- The AOFM sold A$900mln 2.75% Nov 2027 bonds to decent demand, the auction was

covered 3.16x compared to 3.04x at the previous auction, despite a 2bp richer

yield. Demand is reflective of some caution around US paper, though this is

especially evident in shorter dated maturities. Yields on T-bills for October

rose sharply after a weak 4-week bill auction, with the stop out rate higher

than 2-Year UST's. 

- Q2 GDP rose 0.8% on the quarter against estimates of 0.9%, despite current

account balance data showing net trade adding 0.3ppts to GDP. The breakdown of

the release was weak, consumer spending rose less than expected and wage growth

remained weak. The release saw a bid in Aussie bonds while A$ weakened.

- Yields are sharply lower across the curve, seeing some flattening. 10-Year

yield down 8.5bp at 2.59%, 3-/10-Year spread 3bp narrower, AU/US 10-Year spread

has narrowed 9.5bp from yesterday's high due to the debt ceiling impact.