AUSSIE BONDS: AUD Flattening has room to run

* There is scope for further flattening of the AUD yield curve as the market navigates tomorrow's labour market data and next week's RBA policy meeting. * As the RBA has been highly proactive this year, the bulk of the necessary tightening is likely already in the rearview mirror. With next week's hike roughly 90% priced - and a near 5% terminal cash rate baked in through mid-2027 - the hurdle for further hawkish surprises is high. As policy credibility is reinforced and term premium compresses, flattening pressure should extend, giving the 3s/10s spread room to slip toward 20bp from near 30bp. * Near-term, the market must digest tomorrow's August jobs print, which is expected to bounce back by 20k (unwinding July's 15.8k decline) while the unemployment and participation rates hold steady at 4.5% and 66.9%. While a strong headline number could spark immediate bear-flattening, the RBA remains focused on the smoother three-month averages. These continue to signal a gradual cooling in labour conditions. * Finance LP, MNI Governor Bullock has been explicit that a softer labour market is a necessary trade-off to anchor inflation expectations, reinforcing the view that the RBA will maint