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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."