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ACGB Nov-27 Supply Goes Very Well

AUSSIE BONDS

The latest round of ACGB Nov-27 supply was absorbed smoothly, with the weighted average yield printing 2.68bp through prevailing mids (per Yieldbroker), although this may be skewed by diminished liquidity, while the cover ratio improved to 3.41x, bouncing from the 2.53x seen at the previous auction.

  • As flagged in our preview, outright yield levels, despite their recent move away from cycle cheaps, were sufficient to drive demand at the auction, with the cheapness of 5s against 3s and 10s (in z-spread terms) providing another positive for smooth digestion.
  • The continued run of firm pricing seen at the recent run of ACGB auctions, despite the general sidelining of international investors in recent times (amidst uncertainty re: the degree of tightening to be implemented by the RBA in the current cycle), points to the willingness of domestic participants to pay up for access to lines when required. Elsewhere, a recent BBG article pointing to shifting stances at top Australian pension funds towards favouring sovereign bonds (amidst rising recession-related worry) alludes to another potential source of demand.
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