Westpac write "AU rates exhibited......>

AUSSIE BONDS: Westpac write "AU rates exhibited more vol last week than they

have in some time. After trading heavily in line with Tsys & a seemingly more

hawkish RBA outlook, AU bond futures moved higher following Friday's RBA SoMP.

That suggests that the broad 97.70 - 98.05 range we have been exp. to be

maintained throughout '18 has again held. The difference this time, however, is

that mkt has ascribed a higher prob. to the RBA delivering a rate hike beyond

Jul '18. Even so, pricing remains lower than where it was as late as June this

year & Westpac continues to expect the RBA to maintain stable rates through '20.

As such we exp. to maintain a "buy dips" at the front end of the curve for the

foreseeable. The domestic market will be heavily influenced by 2 crucial

releases this week, Q3 Wage Price Index & Oct Labour Force reports. A heavily

indebted AU consumer with little income growth despite full employment has been

central to keeping policy & mkt rates low. An upside surprise to wages might be

the catalyst for a rethink on near term RBA policy. The recent underperformance

against the US & other cross market comparators is unlikely to be sustained for

long & any US-led bear steepening impulses should continue to be faded."