Bonds followed US Tsys in the early....>

AUSSIE BONDS: Bonds followed US Tsys in the early part of the session,

retreating as US President Trump's latest round of tweets re: North Korea helped

to limit demand for safe havens. This was before a bid came into Aussie Bonds,

perhaps showing some demand for the AU/US 10-Year spread to move back out to the

familiar ~-20bp region. Subsequent comments from RBA Gov. Lowe helped to

underpin, as he 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. He also highlighted increased tail risks

owing to global developments and the tightening of credit conditions, stressing

that the Bank wouldn't be worried if credit growth slowed a little. Lowe also

stressed that the decline in house prices is manageable.

- The domestic 3-/10-Year yield differential continues to operate at ~60.0bp,

while the AU/US 10-Year yield spread trades at ~-19.0bp. 3-Month BBSW fixed

0.89bp higher at 2.065% today. The white and red Bill contracts last trade 3

ticks lower to 2 ticks higher, with the front end pressured by BBSW. The rolls

have been active ahead of Friday's exp. with >50% of XM & YM business complete.