###POV IRM8U8 LOOKS ATTRACTIVE TO......>

AUSSIE BONDS: ###POV IRM8U8 LOOKS ATTRACTIVE TO THOSE EXP BBSW PRESSURE TO ABATE

The funding squeeze at the front end of the Australian rates space has been well

documented with both repo rates & 3- Month BBSW fixes running higher through

March.

- 3-Month BBSW now sits above 2.00%, with spill over from the US LIBOR space and

elevated 1-month+ domestic repo rates exerting upward pressure on the fixing,

with quarter end demand for funds being cited as the driving reason behind the

onshore squeeze.

- Tuesday's risk off flow allowed IRM8 to edge higher, last trading at 98.12,

against a recent low of 98.09. The constant grind higher in the BBSW fix/repo

rates during March, alongside the reiteration of the RBA's slow and steady

approach has left the IRM8U8 spread at +.01, which looks attractive for those

looking for the repo/BBSW pressure to abate as we move through quarter end.

- Risks to steepening in the IRM8U8 spread include a further deterioration in

the global trade backdrop and a continuation of the elevated funding costs in

Australia.