Westpac Highlight Cross Market Attractiveness

Westpac note that "after late February's "blow off top", Australia's cross market performance has been generally positive. If global bond markets continue to range trade as we expect, then Australia will come more onto the radar as a cross market yield enhancement play. That will be supported by the fact that investor inflation expectations have been sufficiently recalibrated already, the RBA's QE program is generating negative net issuance for many month to come, and Australia still looks attractive on a global reward-for-risk basis. That is, it has, on average, cheapened against other AAA nations, it is at its widest spread to the average European peripheral market yields and, despite the sell-off in global debt markets since the 4th quarter last year, there is still around US$14 trillion of negative yielding debt globally. That improves Australia's cross market risk rewards even more. We continue to see a test of the 0bp level in the AU-U.S. 10-Year bond spread in coming weeks."