Westpac expect "the ongoing RBA........>

AUSSIE BONDS: Westpac expect "the ongoing RBA cycle to keep rates low for

longer. Hence we will either stay long or neutral in both a tactical and

strategic sense over coming weeks. It is too early to expect yields to rise on

an improving economic outlook. We are neutral at current levels but tactically

we would be better buyers on dips, especially those led by US price action. We

await an extreme before entering. The yield curve continues to flatten to new

levels. We think it will be largely directional based on long end yield shifts,

but we remain of the view that any US-led bear steepening would be short-lived

and should be faded and recommend fading any US-led steepening back toward 30bp.

AU bonds have significantly underperformed the recent rally in USTs. That is

unsurprising given the extent of safe haven buying that has driven the US price

action. However, should US yields start to consolidate again around current

levels, we would eventually expect renewed support for AU bonds. We have taken

profit on our long-held AU-US 10yr bond trade. We will await opportunity to

reset narrowers, but that is still some way from current levels and will need a

switch in broader market drivers."