Aussie Bonds tracked Tsys in the.......>

AUSSIE BONDS: Aussie Bonds tracked Tsys in the SYCOM session and operate

at/around best levels in early SFE dealing. 

- AU paper has continued to outperform US Tsy equivalents in recent sessions,

with the AU/US 10-Year yield differential now trading at ~21.5bp, after trading

at ~-13.0bp earlier this week, while the domestic 3-/10-Year yield differential

continues to operate either side of 60bp.

- 3-Month BBSW fixed ~0.3bp higher today. The white and red Bill contracts are

last trading 1 tick lower to 2 ticks higher.

- Focus today will fall on the domestic labour market report, with

under-unemployment and underutilization continuing to run at elevated levels. In

a speech delivered yesterday, RBA Governor Lowe reiterated that the central bank

expect wage growth to pick up, but only gradually. The trajectory of wage growth

may hinge on the two aforementioned factors that we have highlighted above.

Ultimately Lowe reiterated that the next move in the cash rate is likely to be

higher, but conceded that even though Q1 GDP was stronger than the RBA expected,

the move will not come for some time.