AUCTION PREVIEW: ACGB Apr-25 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.0bn of the 3.25% 21 April 2025 Bond, issue #TB139. The line was last sold on 20 August 2021 for A$700mn. The sale drew an average yield of 0.2696%, at a high yield of 0.2700% and was covered 8.0786x. There were 51 bidders, 9 of which were successful and 2 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 79.5%.

• The post-RBA stabilisation for the space should provide at least some counter to the recent volatile front-end dynamics, although this is the first real test when it comes to front-end coupon supply after the RBA formally did away with its YCT mechanism.
• Ultimately, the well-documented trifecta of negative RBA purchase-adjusted net supply, record levels of liquidity in the domestic banking system and international appeal should provide smooth enough passage when it comes to today's supply.
• Still, micro curve relative value appeal may be a little more in doubt, given the removal of the YCT anchor that protected ACGB Apr-24.
• The recent volatility in the curve and sharp move back from multi-month flats in the 3-/10-Year yield spread may also discourage some from aggressive bidding, which may result in an auction that isn't quite as strong as we have become accustomed to (although the inclusion in the YM futures basket makes the line hedgeable, which will negate some of the worry on that front).
• Results due at 0000GMT/1100AEDT.