On Friday, BofAML wrote "even though...>

AUSSIE BONDS: On Friday, BofAML wrote "even though there is a growing conflict

between the RBA and market pricing on the expected policy path, the backdrop for

longer-term inflation and receiving real rates should still improve. Long-end

breakevens remains undervalued and benefits from a steep real curve. We see a

case where the breakevens curve moves steeper prior to any moves higher and

flatter. If we believe in RBA confidence that inflation eventually returns to

2.50% (midpoint of the target band) then 10y nominals (2.05%) and/or 10y linkers

(0.55%) is mispriced In an environment of easier RBA policy combined with a

stabilisation of the global economy then the widening of long-end breakevens

should be led more evenly by both nominals and real rates. Strikingly,

breakevens reflected in swaps and bonds are near or at record lows. So perhaps

the market is questioning the transmission of rate cuts and believes that wages

growth will remain stubbornly low over a 10-year period. The alternate view is

that 10y rates are simply mispriced and we think the stage has been set for

long-end linkers to outperform nominals."