NAB note that June will see A$45.6bn...>

AUSSIE BONDS: NAB note that June will see A$45.6bn worth of OMO maturities. They

also flag the lack of RBA bond purchases in recent weeks & moderation in ES

account surplus balances to a still "historically massive" level. They also note

that money mkt rates have remained pinned at extreme lows through the tapering.

- NAB believe that the RBA will likely taper liquidity conditions further by not

rolling over the full volume of maturing repos, creating a risk of some periodic

increases in repo, interbank cash & OIS rates over the next month. They doubt

that any such moves will extend too far given the still easy liquidity

conditions and the RBA's want to keep short-end rates exceptionally low.

- They also suggest that BBSW/OIS spreads could be impacted, but to a lesser

degree, given the favourable supply/demand dynamics in NCDs.

- NAB also note that the RBA could decide to offset the lower liquidity via the

FX forward market or outright bond purchases. This could lead to higher repo

rates vs. FX/OIS basis and a tighter Bond/OIS spread. As a result, they believe

that front end swap spreads will likely remain historically tight, and may even

tighten further with BBSW likely to continue to trade rich vs. repo.