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 1 June 2022 for A$1.0bn. The sale drew an average yield of 2.8988%, at a high yield of 2.9050% and was covered 3.2150x. There were 46 bidders, 17 of which were successful and 11 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 17.6%.

• Outright yields operate a touch shy of cycle highs, with Governor Lowe’s pushback against market pricing re: RBA tightening providing a short-term cap for the shorter-dated ACGB space. The domestic 3-/10-Year yield curve operates off of the recently observed post-COVID flats, although remains within the lower quartile of the range observed since the initial COVID outbreak.
• Pricing will likely be on the firm side, with the recent vol resulting in wider bid/ask spreads, which provides scope for solid print through prevailing mids.
• Demand for access to the line, as evidenced via the RBA’s SLF facility (where ~A$2.2bn of the line was borrowed at the last count), may result in an above average cover ratio (which would equate to a cover ratio above 3.00x in the post-QE world), in addition to an even more aggressive round of bidding in price terms, as some will look to secure access to the line by “paying up.”
• The fact that this is the only ACGB offering of the week should provide a further leg of support for the auction, with the same holding true for the line’s benchmark 3-Year status and related hedgabilty via YM futures.
• Results due at 0200BST/1100AEST.