Westpac has recommended buying the.....>

AUSSIE BONDS: Westpac has recommended buying the ACGB 2.75% Nov 2028 bond vs.

selling the U.S. 3.125% Nov 2028 Tsy at -43bp with a target at -70bp and a stop

at -35bp.

- Westpac writes "monetary policy divergence remains the dominant thematic, with

Westpac continuing to expect stable rates in Australia through '20 while now

expecting the Fed to deliver another 4 rate hikes, 1 in Dec and 3 more by Sep

'19. While that view reflects the profile of the Fed's median "dot plot" for

'19, it is not currently reflected in the 1yr forward cash spread between AU &

the US. The spread has widened off its most narrow levels so, now is an

opportunity to re-set narrowers."

- Westpac notes that risks include "near term, the trade is relatively crowded,

technicals suggest that near term stops could be triggered on a move back the

-39bp and the higher AUD will limit the amount of risk allocated to the trade

from unhedged investors. Medium term. if the Fed or RBA outlooks were to shift

significantly."