RBC note that "Aussie Bonds saw a......>

AUSSIE BONDS: RBC note that "Aussie Bonds saw a solid bid out of Japan in May,

rebounding from net selling of $0.7bn in Apr to $2.2bn of buying, the most since

Oct '17. Buying was concentrated in ACGBs & Semis (+$1.6bn). Higher yields & a

lower AUD were possibly catalysts, with the new ACGB May-30 also sparking a

backup in AU/US spreads which may have encouraged flows. It should be noted that

transaction only priced & settled in Jun. Credit buying was more muted, down a

touch to $0.6bn. AUD/JPY twice dipped under Y81.50 in May, which may have

encouraged some unhedged buying. AU 10-Year yields ranged between 2.65-2.92%,

consolidating lower into the end of the month in line with US movements despite

the AU/US 10-Year spread temporarily backing up to about -10bp from the -15p to

-20bp range. For the first time this year, net buying of ACGBs on a 3m rolling

sum basis was comparable to that seen in credit product. ACGB flows have been a

lot more volatile on a m/m basis though. Japanese investors sold large

quantities of Tsys & various EZ bonds, including Bunds/OATs/BTPs, while buying

gilts & Dutch bonds. 3m currency hedged yields in May fell across most major

mkts, including AU which stayed about in line with US levels."