### The AU/US 10-Year spread has.......>

AUSSIE BONDS: ### The AU/US 10-Year spread has widened this week after a slight

tightening in the wake of a sharp rise from the start of June. The spread rose

from a low of 13.9bp in June to match a YTD high of 51bp this week as the

markets were wrong footed by a percieved change in bias from the RBA and the

Fed. Comments from several RBA members that the bank will not be beholden to

hawkish moves from other CB's have lowered short end yields and steepened the

curve. The long end in Australia has been comparatively immune to these

fluctuations, this is reflective of the central bank machinations having an

anchoring effect on the short-end, but also the comparative value in ACGB's vs

semis and the attractive swap levels in longer dated tenors.

>> POV: The spread could be set to narrow again after hitting these high levels,

the Aussie 10-Year yields look cheap by around 2bp compared to their 2017

average, while the 10-/30-Year yield spread has flattened 20bp this year so far.

The longer term sector in Australia has cheapened on a swap basis which could

also result in further demand, while Moody's positive review on Australia will

keep the debt attractive, especially as AU/US monetary policy diverges.