Westpac Look To ACGB 3.75% April 2037 ASW Narrowers

Westpac recommend entering an ACGB 3.75% April 2037 ASW narrower at 27bp, with a target of 15bp and a stop at 30bp.

• They note that "the RBA asset purchase programme is largely in the price and to some extent it is a crowded trade. However, we think there is still scope to for the new purchase programme to reduce some of the current "anomalies" in the bond-swap term structure. That is, while the ultra-long asset swaps have narrowed over the past 3 months, there is still scope for them to move lower, if RBA purchases themselves move further along the term structure than we currently think, or if the global search for yield and the accommodative policy actions in a time of excess economic capacity encourage global and domestic investors to move further out the curve, then we think there is some benefit to re-entering these trades. In our view they should perform over time in any case. We would not put a full risk allocation on the trade at present, however, the 15-17 year part of the bond curve is currently at significantly cheap levels and this should be supportive of the trade."