J.P.Morgan note that "the Australian...>

AUSSIE BONDS: J.P.Morgan note that "the Australian government is significantly

overfunded for now. This is bullish for outrights, but there remain some

unresolved questions regarding supply choices, and repo. Will the AOFM take a

pause in issuance, in the process reinjecting ESAs removed by its overfunding?

Or will the AOFM instead march on, leaving the RBA to allow TFF-injected

reserves to substitute? RBA behavior so far demonstrates that officials feel the

level of reserves in the system is already sufficient. So as leaked QE/TFF

reserves flow back into the system, there may be an imperative to pull back on

repo supply, or FX swap. We are also wary that not all reserves are created

equal. Reserves from fiscal stimulus/QE or the TFF are injected once on a

semi-permanent basis, and are not equivalent to central bank commitment to

maintain an ongoing flow of repo access for dealers, given reserves are

generally under-deployed by banks. In each of the above scenarios, the outlook

for bank unsecured is therefore more bullish than that for repo-funded bonds."