AUCTION PREVIEW: ACGB Apr-25 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$600mn of the 1.75% 21 June 2051 Bond, issue #TB162. The line was last sold on 6 June 2022 for A$300mn. The sale drew an average yield of 3.7995%, at a high yield of 3.8025% and was covered 2.5567x. There were 49 bidders, 21 of which were successful and 13 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 73.5%.

• The recent stabilisation/richening away from cycle cheaps in core FI markets on wider recessionary fear, alongside a related pullback in G10 central bank terminal rate expectations, is supportive for takedown, with the line’s outright yield ~50bp off cycle highs.
• Note that 20-/30-Year zone of the ACGB curve is inverted, which means that the line is looking rich on most relative value metrics.
• The line is the longest currently on issue when it comes to ACGBs, while the A$600mn on offer represents the largest tap of the line on record. We note that this could suggest that the AOFM is looking to build liquidity in the line, while it is also possible that dealer liaison has unearthed some demand.
• The auction should be digested smoothly, although the upsizing of the tap could blur the initial optics by biasing the cover ratio lower (the aforementioned potential for the unearthing of demand via AOFM liaison could limit any downtick in this metric).
• Results due 0200BST/1100AEST.