AUCTION PREVIEW: ACGB Apr-26 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$500mn of the 4.25% 21 April 2026 bond, issue #TB142. The line was last sold on 24 March 2023 for A$500mn. The sale drew an average yield of 2.8595%, at a high yield of 2.8625% and was covered 4.9700x. There were 35 bidders, 5 of which were successful and 3 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 50.0%.

• The last outing for the Apr-26 bond went very well with the weighted average yield printing 2.75bp through prevailing mids and the cover ratio approaching the 5.00x mark. The small number of successful bidders also showed some investors were willing to pay up to access the line. It is important to note that the late March auction occurred at the depths of global banking concerns, with the RBA openly considering a pause at its April meeting.
• Uncertainty regarding the near-term outlook RBA policy ahead of next week’s Policy Decision may work to cap demand. April CPI monthly printed higher than expected at 6.8% y/y (6.4% est.) on Wednesday. Moreover, in his testimony to parliament this week, RBA Governor Lowe stated that monetary policy is restrictive and working but unit labour costs need to come down with higher productivity growth to meet its inflation targets.
• The recent outright cheapening in the line and the flatness of the curve are however likely to provide some sort of offset for policy concerns. The line’s hedgability owing to its inclusion in the YM futures basket, as well as its 3-year benchmark status are likely to be positives for demand.
• Overall, another round of well-received supply is expected.
• Results are due at 0200BST/1100AEST.