Following the release of the AOFM's....>

AUSSIE BONDS: Following the release of the AOFM's 2018/19 issuance schedule TD

Securities "see few implications for markets from this announcement. Looking

ahead, net supply of ACGBs is set to fall to A$18b in 2019-20 and forecast to

turn negative by 2020-21. Our view that (optimistic) Budget revenue projections

could disappoint implies that the risks are tilted towards higher supply in the

outyears." TD also notes that more issuance has been set aside for syndicates

than in 2017-18.

- They believe that "longer dated issuance is unlikely to steepen the curve. The

bulk of the syndicated issues/new lines are likely to be targeted towards the

longer end, consistent with the AOFM's intention to extend the curve & support

liquidity of 20yr futures. As this is not new, it's not a trigger for

steepening, especially as net supply continues to fall. We exp. the ACGB 10s-30s

curve to flatten further. Strong demand from liability manager, low odds the

market is placing on an RBA hike & Japan Lifers likely to extend out the curve

if unhedged flows pick-up suggest ltd scope for longer dated steepening. The

supply outlook shouldn't have a bearing on the AU/US 10yr spread."