NAB Formally Recommend AU/U.S. 10-Year Tighteners

NAB note that "given the wide spread over our fair value estimate we recommend buying ACGB the Jun '31 vs Feb '31 U.S. Tsys. We target a level of +5bp for the spread and set a stop-loss level of +30bp. The key risk to the trade is that ACGB rates materially underperform if, for example, the U.S. outlook deteriorates materially but the market prices further early tightening from the RBA. Additionally, as recent events have shown, the spread is vulnerable to widening during a volatile selloff, although positioning might be less of an influence going forward than it may have been in initial selloff."