AUCTION PREVIEW: ACGB '31 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$2.5bn of the 1.00% 21 November 2031 Bond, issue #TB163. The line was last sold on 7 October 2020 for A$2.5bn. The sale drew an average yield of 0.8975%, at a high yield of 0.9000% and was covered 3.8560x. There were 56 bidders, 27 of which were successful and 18 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 31.2%.• The recent cheapening, linked to the U.S. election and COVID-19 vaccine news flow, has provided concession in addition to curve steepening into today's supply, although the velocity of the move may deter some from adopting aggressive bidding stance.• Still, the RBA's adoption of a purer form of QE, which is already underway, is set to support takedown, given the notion that a typical week will see negative net supply (based on AOFM issuance and RBA purchase guidance), even before considering redemptions and coupon flows.• Speculation surrounding and the ultimate enactment of the RBA's purer QE has seen swap spreads away from record tights, although swap spreads remain at very tight levels from a historical perspective.• This should ultimately sum to result in another AOFM tender that is firm, by historical terms, at a minimum.• Results due at 0000GMT/1100AEDT.