Westpac write "the market has opened...>

AUSSIE BONDS: Westpac write "the market has opened after Easter with a strong

bid tone as the post-employment dip has been used as an entry point to the

market. We have been surprised by the strength but do point out that the RBA

Minutes were certainly more dovish than previously. We remain better tactical

buyers on dips. US 10yr yields should not move through 2.62-63% on any further

bearish correction, which will help define the entry level on tactical longs in

AU. Will the curve shift significantly in coming days? While a bear steepener,

led by the US is possible we think it would be only marginal given that any

bearish impulses could initially be felt across the term structure as a result

of valuation extremes. The AU-US 10yr bond spread is now back testing its record

inversion of -68bp. With RBA rate cuts expected in August and November, but not

currently factored-in, 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 once the currency dips."