The space has continued to operate.....>

AUSSIE BONDS: The space has continued to operate around session highs, with the

3-Year Bond futures last trading at 97.895 (+4.0 ticks), while 10-Year futures

trade at 97.255 (+5.25 ticks).

- The domestic 3-/10-Year yield differential sits at 67.2bp, while the AU/US

10-Year spread operates around the -8bp mark.

- The front end of the Bill strip continues to underperform with 3-Month BBSW

fixing higher again today.

- In early SFE dealing comments from RBA's Kent reiterated that a rate hike will

not come any time soon, however, he did note that when a hike comes it doesn't

necessarily have to be in 25bp increments, which has supported the space as it

suggests that future tightening may be more gradual. Kent also highlighted that

markets may be under pricing the risk of faster global growth.

- Macquarie have pushed back their call for an RBA hike to early '19 (prev. 2

hikes in '18), noting that a genuine case be made to hold rates lower for longer

than base case, particularly if inflation & the unemployment rate only improve

gradually as per the RBA's central forecast.