VIEW: Wednesday saw BofAML note that...>

AUSSIE BONDS: VIEW: Wednesday saw BofAML note that "the RBA has made it clear

that recent labour mkt data lends support to the argument that easier policy

would now be appropriate. We exp. the Bank to lower the cash rate in June &

August. We have subsequently lowered our rates f'cast across the curve & see 10y

yields rising but only to 1.90% instead of 2.25% by year-end. However, our

f'casts remain above fwds as policy-makers still hold flexibility around

policies to improve the outlook. Near-term RBA policy adj. & LT fiscal measures

argue for higher term premium & steeper yield curves. This is supported by a

step-up in bond redemptions over the coming years & the govt's focus on long-end

supply. We note, front-end positioning is overweight & RBA pricing already

reflects 2 full rate cuts this year, so any move lower in the terminal rate is

likely to be gradual & may temper some curve bull steepening pressures. Global

uncertainty could also limit the back-up in long-end yields. The RBA's easing

bias means the AU US 10y rate differential should remain -ve for some time.

Greater focus by the RBA on achieving its inflation target & easier fin'l

conditions via FX are +ve for inflation exp. We like being long 10y breakevens."