Westpac write "the market has..........>

AUSSIE BONDS: Westpac write "the market has followed risk-negative trade

developments with a strong bid tone. We expect geo-political uncertainties will

continue to support AU bonds over the coming weeks. Buy 3yr bond futures on dips

to 98.70. 10yr futures remain vulnerable to offshore influences while 3yrs

relatively range bound. Geo-political uncertainty likely to keep yields

compressed in the long end and keep the curve flat. It is too early for a shift

steeper on our RBA view. Longer BEIs were lower on the week after the RBA kept

rates on hold, demonstrating a higher tolerance to below target inflation than

previous Boards. 5y5y BEI has bounced off record levels, but remains cheap. It

is too early to buy BEIs, however it would provide good participation in any

global outright sell-off. With RBA rate cuts expected in August and November,

there are reasons for the AU/U.S. 10-Year 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 once the currency dips."