The IR strip failed to escape the ED...>

AUSSIE BONDS: The IR strip failed to escape the ED curve flattening theme this

week, with some Australia-specific factors in play as well.

- There was the soft AU Q3 GDP reading, complete with slowing pvt consumption &

soft import data, which leaves the RBA's GDP exp. for '18 & '19 in question (for

those that weren't already dubious), with the AU economy having to grow by 1.3%

in Q/Q terms during Q4 in order for it to meet the Bank's 3.5% '18 exp.

- Elsewhere RBA Deputy Gov. Guy Debelle spoke late Thursday, noting that "the

RBA has repeatedly said that our exp. is that the next move in MonPol is more

likely up than down, though it is some way off. But should that turn out not to

be the case, there is still scope for further reductions in the policy rate. It

is the level of interest rates that matters and they can still move lower."

Debelle seemed relaxed when questioned on recent GDP data, perhaps suggesting

that his initial comments in the speech allude to broader scenario analysis, as

opposed to central RBA discussions.

- These factors, alongside a gradually rising 3-Month BBSW fixing (which left

IRZ8 6 ticks lower w/w), pushed IRZ8Z9 into negative territory this week.