VIEW: Tuesday saw Bank of America Research......>

RBA: VIEW: Tuesday saw Bank of America Research note that "the Reserve Bank of

Australia's aggressive balance-sheet expansion through 3yr yield targeting and

liquidity injections has been successful, in our view. Funding conditions have

eased significantly and market functioning appears more orderly. The outlook for

government deficits and the RBA's recent tapering of bond purchases are holding

long-end swap spreads at record tights and AUD curves steep relative to other

core markets. Yet, there has been little discussion of negative rates in AU, so

bull steepening for the curve has also been capped. However, the next challenge

for the RBA is management of system liquidity. There is AUD46bn worth of

repurchase agreements dating from March due for maturity next month. We expect

the RBA to resume bond purchases to buffer some of the impact. This would lead

to flatter curves, tighter Semi spreads, wider long-end swap spreads and the

tempering of AU US 10yr spread widening. We like paying June-20 OIS (vs 3yr

rates) as a hedge to further RBA market normalization. Risk is for more extended

RBA tapering and steeper global curves."