AUCTION PREVIEW: ACGB Apr-25 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 3.25% 21 April 2025 Bond, issue #TB139. The line was last sold on 22 June 2022 for A$1.0bn. The sale drew an average yield of 3.4785%, at a high yield of 3.4800% and was covered 3.1650x. There were 47 bidders, of which 9 were successful, and 4 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 90.9%.

• The more than digestible DV01 on offer (A$165mn), outright yield levels and recent step down in the pace of RBA tightening are all supportive factors for the auction, although ongoing market vol. and uncertainty re: the RBA terminal cash rate may cap the cover ratio.
• The flatness of the broader ACGB curve is a plus for takedown, with the line looking fairly valued in a micro-RV sense.
• Hedgability of the line via YM futures is also a plus, although the bond no longer enjoys benchmark 3-Year status.
• Heavy borrowing of the line via the RBA’s SLF (A$1.631bn currently borrowed) points to lingering underlying demand, which should support takedown.
• Ultimately, pricing should be comfortably through mids, with cover at least ample.
• Results are due at 0100BST/1100AEDT.