Futures hit contract highs during......>

AUSSIE BONDS: Futures hit contract highs during the session on Tuesday, 3-Year

briefly touching 98.11 and 10-Year 97.505. Risk off sentiment spilled over into

Asia after reports that North Korea could conduct another missile launch test

this week.

- While bonds gained on the session the elevated levels could not be sustained

and futures head into the close 1 tick higher in 3-Year at 98.08, 2.5 ticks

higher in 10-Year at 97.485. The upside move was accerlated by a wave of buying

in Interbank Bills which pushed the implied odds of an RBA hike by Q3 2018 to

below 30%, sources note the drop from highs was on profit taking, technical

related selling and high grade corporate issuance after HSBC launched a A$1bln

total dual tranche.

- Yields fell across the curve, the belly leading the way lower ahead of the

A$900mln 2.75% Nov 2028 bond sale tomorrow. 2-year yield fell 2.2bp to 1.737%,

dropping below the US equivalent for the first time in 17-years.