It had been a fairly sedate session....>

AUSSIE BONDS: It had been a fairly sedate session for the space until Westpac

raised its standard variable home loan rate by 14bp to 5.38%, reflecting "a

sustained increase in funding costs." The potential policy feedback here,

especially if some of the other large banks follow Westpac's lead, is that

households will feel the pinch from higher mortgage payments, crimping household

spending/consumer optimism, leaving the RBA on hold for longer.

- The domestic 3-/10-Year yield differential has steepened by circa 2.5bp at the

time of writing to sit just above 55bp, as the short end has outperformed on the

back of the Westpac headlines, with AU 10s outperforming their U.S. Tsy

counterparts, pushing the AU/U.S. 10-Year yield spread back below -30bp.

- The Bill & IB space has seen solid buying on the back of the Westpac rates

headlines, with the Bill strip last unchanged to 5 ticks higher. IBJ9 now

implies a mere 6% chance of a hike by the end of July '19, with Westpac's

mortgage rate move adding further credence to the recent widespread pushing back

of RBA hike calls in the analytical community.

- Tomorrow's AU CapEx release dominates the domestic docket this week.