Westpac write "3yr yields are not as...>

AUSSIE BONDS: Westpac write "3yr yields are not as expensive vs. fwd cash exp.

leading into this cut as they were ahead of the 1st cut in '16. Even so, it will

be difficult for 3yr yields to push through 1% until the timing of a follow-up

cut is better known. Buy 3yr bond futures on dips below 98.80. We exp, the curve

to steepen on the delivery of a rate cut, but we don't think it will be

sustainable until the data proves the effectiveness of MonPol. Meanwhile US 10yr

direction will be a bigger driver. Fade any US-led steepening back toward the

50bp level. BEIs are low but are awaiting confirmation that RBA policy is

effective off current levels. We think they will eventually trend higher from

current levels. It is too early to buy BEIs. We are surprised by the rapid

correction in the 10yr spread vs. the US, but it reflects a re-pricing of US

risks moreso than a shift in investor exp. around AU. With RBA rate cuts

expected in June, Aug & Nov, there are reasons for the spread to continue to

perform. Further outperformance will be slow, however there is little reason to

expect a major underperformance while the RBA outlook is shifting. The next

major move will most likely occur on a further RBA-driven dip in the currency."