Westpac believes that "the focus.......>

AUSSIE BONDS: Westpac believes that "the focus will remain on the evolution of

short-term funding rates as we move to the quarter end. 3m BBSW has behaved

significantly different to the past 3 quarter-end periods, which exhibited far

more funding pressures this close to quarter end than is currently evident. At a

spread to OIS of ~+40-45bp, 3m BBSW remains around what we have for some time

viewed as the new medium-term "normal". While there is still scope for this

benchmark unsecured spread to widen ahead of 30 Sep, we think this is evidence

that the recent quarters have been influenced by structural shifts. Both bond

futures contracts remain well within recent ranges & will continue to do so for

the foreseeable, making us a better buyer on dips, especially at the shorter

maturities. The curve has bear steepened in response to the US price action, as

exp., but the AU curve will not get too far "out-of-sync" with US outcomes,

where we exp. flattening. So we would be entering flatteners in the 3-10yr

futures spread ~60bp. AU bonds have outperformed, however, given that the

market's pricing for the Fed varies from the Fed's own median projection, we

would not be taking profit on these positions ahead of next week's FOMC."