RBC "add a prospective new trade,......>

AUSSIE BONDS: RBC "add a prospective new trade, waiting for further curve

steepening to buy Apr-27s vs Apr-25s at 25bp (currently 22.5bp). Carry & roll on

the flattener is currently about +1.9bp over 3mths. The Apr-27s should benefit

from the pending creation of a new 5y futures contract, as they would likely

slot in as one of the underlying bonds which would help liquidity & demand. They

also currently have the best carry & roll on the ACGB curve. Conversely, the

Apr-25s have just entered the 3y basket which typically signals a reversal of

prior outperformance is due. They don't look too bad on RV, but we think there's

now better value a little further up the curve. We are cautious on levels given

a still highly uncertain macro backdrop and high beta to offshore moves, so

we're looking for slightly better levels to enter, although as a longer term

proposition the extra carry & roll should help offset mild further steepening.

An alternative trade with a less outright risk, in our view, would be to do the

same in ASW terms, where we would target an 8bp pickup (currently 6.3bp)."