It was a tale of 2 halves, initially...>

AUSSIE BONDS: It was a tale of 2 halves, initially pressured on the back of a

looser mortgage lending standards proposal from the APRA, before recovering in

the wake of the RBA's May meeting minutes which noted that "members considered

the scenario where there was no further improvement in the labour market in the

period ahead, recognising that in those circumstances a decrease in the cash

rate would likely be appropriate." RBA Gov. Lowe went one step further, stating

that "a lower cash rate would support employment growth & bring forward the time

when inflation is consistent with the target. Given this assessment, at our

meeting in 2 weeks' time, we will consider the case for lower interest rates."

Lowe stressed that the Bank needs help on the fiscal side, with earlier reports

suggesting that the gov't may not be able to pass legislation to allow for tax

cuts ahead of the promised July 1 deadline owing to continued vote counting.

- YM +3.0 ticks, XM +2.5 ticks. YM/XM at 46.5 ticks. Bills +2-5 ticks thru the

reds, OIS price a 70% chance of a June cut, IB's ~90%. CBA have joined those

calling for rate cuts, and now look for an initial cut next month, followed by

one in August, with many others front loading their existing calls.