The AU fixed income space has had a....>

AUSSIE BONDS: The AU fixed income space has had a limited reaction to the softer

than expected headline AU Q2 CapEx print, with the key plant and machinery CapEx

component falling by 0.9% in Q/Q terms. The much watched 3rd estimate of

2018-2019 Capex ticked up to A$101.9bn, and was pretty much in line with

estimates. Participants are seemingly more focused on the potential for mortgage

rate adjustments from the remaining tier 1 AU banks, following the move from

Westpac yesterday. Westpac's move led to outperformance in AU Bonds, with the

AU/U.S. 10-Year yield spread last at ~-32.0bp, while the domestic 3-/10-Year

yield differential continues to steepen, last ~56.0bp. Corporate issuance

continues to garner attention, Credit Union AU launched $200mn 3-Year paper,

while Bank of Montreal launched A$ 3- & 5-Year Kangaroo paper, aiming to take

advantage of AUD/CAD basis.

- The Bill strip sits unchanged to 2 ticks lower, easing a touch after the late

spate of buying that was observed in Wednesday's SFE session, although the weak

CapEx data leant a degree of support. IBN9 prices a mere ~6% chance of a 25bp

RBA rate hike by the end of July 2019.