Refile (Removes reference to table.....>

AUSSIE BONDS: Refile (Removes reference to table 1)

- On Wednesday CBA wrote "we would move to sell the May IB and buy the August IB

at the current spread of 20bp. If the RBA does cut rates in May, the likelihood

is that the August IB immediately moves to price a second rate cut, either in an

intervening month (June, July) or in August itself. So while a rate cut in

August triggers a 14bp loss on the May IB, it would probably trigger a 20bp, or

more, gain on the August position. In contrast, if the RBA doesn't cut rates in

May, it's probable that nothing they say will be enough to remove the current

rate cut pricing. The absolute best outcome for the trade would be for the RBA

to leave rates unchanged but adopt an explicit easing bias in May. That's not a

likely outcome, but it does seem to be a clear risk at present. The trade

performs fairly well in the most likely scenarios, with one clear exception - no

change in rates at all. Our most likely scenario is that there won't be a move

in either May or August. However, we want to set an insurance trade. In this

instance, we'd look to exit the trade should the RBA not cut rates in May."