The space continues to operate.........>

AUSSIE BONDS: The space continues to operate around Friday's closing-slightly

lower levels, although a solid auction of a 10-Year Bond basket constituent has

helped to underpin the space.

- The latest auction result isn't all that surprising given the recent run of

strong results in the auctions of the shortest Bond in the 10-Year futures

basket, which has now spread into the longest line eligible for delivery. Such a

solid auction result suggests little worry surrounding the chances of a stronger

than expected Australian CPI result tomorrow.

- The domestic 3-/10-Year yield differential last trades 1.9bp steeper at

58.9bp, while the AU/US 10-Year yield spread sits 1.0bp wider at -11.0bp.

- 3-Month BBSW fixed unchanged today which has provided a degree of support to

the front Bill contract, which trades a tick lower, while the remainder of the

white & red contracts trade 2-4 ticks lower.

- Focus falls on tomorrow's domestic CPI release & an address from RBA's Kent.