Westpac note that "both 3yr and 10yr...>

AUSSIE BONDS: Westpac note that "both 3yr and 10yr swap EFPs continue to push to

new record inverse levels, with the main drivers being identified as the huge

amount of liquidity that has dampened BBSW and basis spreads in general, the

large and ongoing AOFM borrowing requirement, the strong message that the RBA

will keep rates on hold for years to come, the lack of pay-side appetite from

corporate liability managers, especially as a lot of hedging has been undertaken

already and there is not a large amount of older hedges rolling off near term.

In addition, there are still positive carry opportunities in holding swap

relative to bonds and that should keep receive-side flows as the more dominant

influence on swap spreads near term. The 1y2yr and 1y3y will get the main

benefit of these flows and that should keep the 3yr EFP from widening much,

outside of periodic profit-taking, in coming weeks."