Westpac write that "the rates mkt is...>

AUSSIE BONDS: Westpac write that "the rates mkt is facing a number of challenges

to the recent valuation status quo. These include the futures mkt trading

heavily as the Dec "turn" approaches, a flattening of the 3-10yr curve to the

bottom of recent ranges, the steepest 3-10yr swap EFP in weeks & a broad AU

rates underperformance across the term structure, not only against the US but

most other developed markets as well. In addition, the AUD has reached its

highest level since Aug. So, is the market undergoing a sig re-assessment of its

Australia's policy, growth & inflation outlooks? We do not think so. With even

the most hawkish of observers conceding that the RBA will be maintaining its

current policy setting for at least 6-9 months, there is little scope for short

end pricing, outright yields, curve shapes or spreads to materially breach the

ranges that have been in place throughout most of '18. While that makes the

market vulnerable to positioning squeezes, we remain buyers on the dip at the

short end, funding fears notwithstanding. We also think that the recent curve

flattening has largely run its course but that there may be some further

near-term pain in cross market spreads - at least until the AUD rally slows."