BofAML writes "recent changes to.......>

AUSSIE BONDS: BofAML writes "recent changes to guidance from the RBA put the

focus squarely on growth and the labor market as key variables that might prompt

a shift toward an eventual easing of policy this year. The labor market is

holding up and we look for a decent rebound in 4Q GDP growth after a weak

reading for 3Q. While the economy slowed at the end of last year, activity in 1Q

looks to be holding up. This should buy the RBA some time to get through a busy

political schedule in coming months before a reassessment of the growth outlook

by the middle of the year. The risk is for a shift to dovish guidance. For the

rates market, any 3y longs that are held in anticipation of a near-term shift

may have to wait a while. If levels of open interest and price action for

futures are any indication of risk sentiment and positioning, then the market

has already discounted slower growth and is overweight the 3y sector. The

influence of global factors can be seen in Chart of the day; the AU rates rally

reflects global conditions, especially the change at the Fed. Any correction

would risk further curve flattening ahead of the futures rollover. The AU 1y1y

vs. 5y5y curve still looks steep relative to other markets."