NAB suggest that ACGB 3-year paper.....>

AUSSIE BONDS: NAB suggest that ACGB 3-year paper is expected to draw support at

the top of the recent yield range, which should widen swap-bond spreads. NAB

suggest that recent cheapening of front-end Aussie paper vs. swaps has been

influenced by the repo-BBSW spread, which has reached new wides, driven by repo

into quarter end.

- Divergence between repo & BBSW reflects domestic cash positions improving

relative to offshore say NAB in the note, and they look for repo to ease after

quarter end.

- NAB conclude by noting that ACGB Nov. 2020 ASW spread looks wide relative to

repo-BBSW moves, with the bond also cheap from a relative value perspective,

trading at around a ~3.5bp discount to the curve, and as such they recommend

going long ACGB Nov. 2020 on ASW at +2bp, with a target of -8bp, and a stop at

stop +6bp.