AUCTION PREVIEW: ACGB Apr-27 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 4.75% 21 April 2027 Bond, issue #TB136. The line was last sold on 8 October 2021 for A$1.0bn. The sale drew an average yield of 0.9920%, at a high yield of 0.9950% and was covered 5.7950x. There were 53 bidders, 16 of which were successful and 8 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 46.2%.

• Outright yields have stabilised a little in recent days, edging away from cycle highs, with RBA tightening pricing back from extremes and general growth worries feeding into global markets.
• This is a fairly atypical tap for the AOFM, although the digestible DV01 on offer ~A$332K and stabilsation of the 2-/5-/10-Year butterfly structure (albeit with 5s operating near multi month richest levels on that structure) should mean that the auction goes smoothly enough. Elsewhere, micro relative value appeal hasn’t moved much in recent times.
• We also note that there has been some demand for access to the line via the RBA’s SLF in recent days, although this has pared back to near 0 at the last count.
• The above mix of factors should result in a smooth auction, which should print comfortably through mids.
• Results due at 0200BST/1100AEST.