VIEW: ANZ note that "the amount of.....>

AUSSIE BONDS: VIEW: ANZ note that "the amount of surplus ES balances is still

very high. Also, as the gov't spends money, this results in an increase in ES

balances. While the settlement of the ACGB Dec '30 led to a sharp fall in ES

balances, the policies that the borrowing is funding will lead to an increase in

balances over time. Therefore, it is better to see the RBA's actions as a step

back from day-to-day liquidity management. This makes sense when the ES system

is in a state of perpetual abundant liquidity. Markets took a different view,

seemingly thinking that the inaction indicated a pullback in RBA support for

funding markets. Bills/OIS widened & shorter-dated IRS sold off on Friday. Any

further sell-off in front-end IRS or widening in Bills/OIS should be faded in

our view. Even if surplus ES balances were to decline further, the factors

propelling Bills/OIS into -ve territory remain. Banks are very well funded,

helped by the combo of massive deposit inflows & the availability of the TFF.

This means that the supply of bills will remain low near-term, keeping Bills/OIS

low. In order for Bills/OIS to widen or front-end IRS to sell off in a sustained

way we would require some sort of shock. We see this as very unlikely."