AUCTION PREVIEW: ACGB Apr '26 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 4.25% 21 April 2026 Bond, issue #TB142. The line was last sold on 14 May 2021 for A$1.0bn. The sale drew an average yield of 0.7149%, at a high yield of 0.7175% and was covered 3.9550x. There were 43 bidders, of which 14 were successful and 8 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was %.

• This line hasn't seen many taps in recent years, given the zone of the curve that it fell in and the large size already issued.
• The potential for the RBA to move off of its earlier tapering decision (which wasn't set to go into play until mid-September) on the back of the domestic COVID lockdowns will support the belly of the curve, and this has already been reflected in the modest richening of the 5-Year zone on the 2-/5-/10-Year butterfly vs. levels seen at the backend of last week. 5-Year swap spreads are also a little tighter over that horizon.
• Further out, AOFM issuance dynamics will be eyed, with the longer lockdowns in the likes of NSW & Victoria likely to = an uptick in issuance.
• Still, the RBA QE dynamic, abundant liquidity in the domestic banking system and international appeal of the space should result in smooth passage of the line.
• Results due at 0200BST/1100AEST.