VIEW: CBA believe that FY20/21 will....>

AUSSIE BONDS: VIEW: CBA believe that FY20/21 will see the AOFM look to issue

more in the way of longer dated paper. They also warn that the AOFM will have to

pay more attention to both the YM & XM futures baskets e.g. by bringing the ACGB

May '32 and ACGB Apr '33 lines up to size. They go on to note that the liquidity

in the market and hedgability with futures allows large deals to be done

quickly, although they believe that is more of a reason to preserve the

integrity of XM futures, as opposed to reverting to this issuance method

frequently.

- They expect the 10-Year ACGB vs. OIS spread to remain wide, to entice buyers,

both from onshore and abroad. However, given their expectations for increased

longer dated issuance in FY20/21 they suggest that it is quite plausible that 3-

& 5-Year ACGBs outperform OIS (already seen to a degree in 2s and 3s, but not

5s).

- As a result they recommend a long ACGB Apr '25 vs. OIS spread position (at

11bp) boxed via selling the ACGB May '30 vs. OIS (at 22bp). They target a move

to 18bp, with a stop at 8bp.