Westpac notes "AU annual growth........>

AUSSIE BONDS: Westpac notes "AU annual growth should hold steady at 3.4%, which

remains well > trend, in line with RBA exp. However there are also sufficient

headwinds (wages growth, housing declines, high debt levels, slowing credit) for

the RBA to remain sanguine about the outlook for now. With 3yr futures prices

above 97.910, nearing the upper end of the range that has traded for most of

2018, risk rewards would support taking some longs of the table, if not

establishing a small tactical short. The other focal points for AU rates are

funding levels, curve shape & cross mkt performance. December has arrived and

there is a view that "spare" cash from Oct & Nov maturities & coupons has now

been invested elsewhere. That potentially supports tighter funding conditions.

BoB spreads pushed marginally higher last week, and we are watching USD tighten

in other mkts. Whether that feeds through into AUD rates is yet to be seen.

While there is no fear of a major squeeze, there remains potential for higher

funding rates in coming weeks. We expect the 3-10yr futures spread to remain in

the 50-60bp range, while we have been impressed with the AU cross market

resilience in the wake of last week's UST rally."