VIEW: Westpac note that the............>

AUSSIE BONDS: VIEW: Westpac note that the "syndication of the new '30 ACGB is

the key risk event this week & has re-focused mkt on the AOFM's extended supply

profile. As a result, mkt is trading heavily & 10yr bond futures are testing

support at ~99.00-05. This has been tested but, not breached, on a number of

occasions since the extreme vol. of late Feb/early Mar. While this is a tech

level, it is also important because it also reflects the 1.00% level that we do

not think 10yr yields should move materially/sustainably over. It is only fears

around supply that are bearish, there is nothing in the fwd growth or inflation

profiles, nor our monetary policy exp. that suggests that yields need to be sig.

higher. While there is an element of mkt confidence that policy responses are

working, it would be way too pre-emptive for a sig. bear trend to materialise.

That is for later in the year. Last week we wrote about the supportive factors

for the market, including the AAA rating, pre-eminent governance and policy

delivery, the low debt-to-GDP starting point and Australia's excellent relative

"reward-for-risk" characteristics. While we are at our widest 10yr spread to the

US in 2yrs, the real yield diff reflects even better RV."