Westpac: Cross Market Outperformance To Fade

Westpac highlight that their expectation "for 10-Year Aussie bonds near-term is skewed towards the bear side, and evolving optimism around the easing of restrictions and vaccination rates should see sell-offs in that part of the curve. With this in mind, the curve flattening trend from June has now reversed into curve steepening, and our central view is that this steepening will continue. The positive risk sentiment from the expected recovery of the Australian economy is reflected in Aussie bond cross market performance relative to the U.S. beginning to slow. A further increase in the confidence of Australia's post lockdown recovery should see this Aussie bond outperformance fade, and we expect to see the AU-U.S. 10-Year spread eventually return to positive territory."