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ACGB Nov-33 Supply Smoothly Digested, Cover Ratio Not Too Firm

AUSSIE BONDS

The first tap of ACGB Nov-33 since its initial syndication went smoothly enough on the pricing side, with the weighted average yield pricing 0.97bp through prevailing mids (per Yieldbroker). The cover ratio story wasn’t as firm, printing 2.25x. Although that level doesn’t point to any outright difficulty when it comes to digestion, it wasn’t anywhere near the highest level of cover observed at recent ACGB auctions. The recent stabilisation of Aussie bonds away from cycle cheaps (with ACGBs on track for their largest one-month gain since 2012) and pickup in yield vs XM futures likely factored into the firm pricing at today’s auction, outweighing incremental negatives from micro relative value matters and the flatness of the 3-/10-Year yield curve, with the previously-flagged larger DV01 on offer proving digestible enough for participants, albeit perhaps limiting overall demand. The line saw some slight cheapening post-supply but has recovered most of the lost ground., while XM futures were already trading off of best levels ahead of the auction.

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