Morgan Stanley believe that "Australian...>

AUSTRALIA: Morgan Stanley believe that "Australian bonds are a buy because the

RBA will keep interest rates at a record low for at least the next 6-12 months."

- MS is underweight the AUD for the same reason. 

"The RBA is the furthest away from hiking rates amongst any industrialized

countries, that could allow Australian bonds to continue to do well versus US

bonds & other G10 gov't bonds. While the RBA will probably stay on hold for the

rest of this year, the Federal Reserve is going to increase its benchmark rate

at least three times over the next 12 months to 2.5%. The domestic economy in

Australia is not doing well enough. The labor market is not doing well enough.

Wages are not doing well enough. The housing market is having troubles at the

moment now. So the RBA is not going to raise rates."

- MS note that "you pick up yield by selling the Australian dollar for the US

dollar, you actually earn incremental yield. It's the cheapest it's ever been to

sell the Australian dollar today."