AUCTION PREVIEW: ACGB Apr-24 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.5bn of the 2.75% 21 April 2024 Bond, issue #TB137. The line was last sold on 3 December 2021 for A$1.5bn. The sale drew an average yield of 0.6718%, at a high yield of 0.6800% and was covered 2.5900x. There were 57 bidders, 26 of which were successful and 14 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 17.7%.

• This line has been particularly volatile in recent sessions, pointing to illiquidity that probably stems from the RBA’s YCT scheme, which focused on the line. The illiquidity in the line could be one reason for the fairly large tap (in notional size).
• While the seeming lack of liquidity in the line could present some headwinds, the relative difficulty in securing access to the line should result in a smooth auction (although SLF demand for the line isn’t particularly large, at least by recent standards, but is still healthy, with ~A$900mn lent out at the last count).
• The well-documented cheapening of the space also presents a more attractive entry point in outright yields vs. the Dec auction (last yielding 1.91%), which could entice those of a more dovish disposition given the fairly aggressive RBA cash rate profile baked into markets at present.
• All in all, we expect the solid pricing once again.
• Results due at 0100BST/1100 AEDT.