ACGB May-34 Supply Goes Well

Expectations of sustained strong pricing at auctions proved accurate, as the possible negative factors mentioned in our auction preview did not significantly hamper the overall strength of bidding.

• The latest round of ACGB May-34 supply sees the recent run of strong pricing at ACGB auctions continue with the weighted average yield printing 1.0bp through prevailing mids (per Yieldbroker). The cover ratio moved higher to 4.2714x from 3.7812x at the March auction.
• A significantly higher outright yield compared to the previous offering, a low level of issuance, and the line’s hedgability given its inclusion in the XMM3 basket all look to have contributed to today’s bidding.
• The small number of successful bidders also showed some investors were willing to pay up to access the line.
• There has been nothing in the way of notable movement in ACGB-34 cash trade and XM futures post-auction.