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AUSSIE BONDS: VIEW: Westpac note that "RBA Governor Philip Lowe reiterated that
it would be many years before cash rates would rise, and that will keep risk
free rates low across the term structure. At the same time, the success of
Australia's health and economic response to the pandemic needs to be
acknowledged and, along with the ongoing bond supply program, that will be a
bearish influence on bonds. So, yields are off their lows but there is no real
sign that supply is swamping demand at the moment, limiting the bearish impetus
from that source. A range-trade has therefore ensued and we think it will remain
in place for now. Of course volatility within the range will be dominated by
swings in global sentiment, as reflected in the strong correlation with UST
yields. However, domestic-based relative value metrics suggest that any moves
above 1.0% in 10yr AU bonds should be seen as a buyside entry zone. Conversely,
should moves below 0.8% should be sold into. Previously we were more comfortable
fading sell-offs but now we acknowledge at that there is likely to be greater
scope for short-sharp sell-offs than there is for any major re-price in bond
yields to a lower range."