Late on Tuesday TD Securities..........>

AUSSIE BONDS: Late on Tuesday TD Securities recommended paying the Aussie

10-Year swap EFP at 14.75, with a target of 20.0 and a stop at 12.0.

- This involves buying a 10-Year Bond future (referenced at 97.130) alongside

paying 10-Year swaps.

- From a technical perspective TD notes that "the divergence of 10-Year Aussie

swap spreads from US 10-Year swap spreads has meant that our Aussie 10-Year swap

EFP model has not tracked actual swap EFPs well over the last year. Nonetheless

the model has continued to provide valuable signals at extremes. The

actual-model spread is once again near extremes with 10yr swap EFPs widening 1bp

since mid-May."

- On the positioning front TD notes that "most of the street is paid thanks to

Kanga supply, not on the potential for a rally in the outright."

- TD highlights the major risks to the position as "a sell off in the outright

or a pick-up in long dated Kanga demand."