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 20 May 2022 for A$700mn. The sale drew an average yield of 2.9758%, at a high yield of 2.9775% and was covered 3.2914x. There were 40 bidders, 13 of which were successful and 8 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 71.8%.

• Recession-related worry stemming from the U.S. and Europe has allowed the space to stabilise in recent weeks, with the line operating ~80bp off cycle cheaps ahead of auction.
• The line looks a little more appealing than some of its nearby counterparts in relative value terms, although 5s trade towards the richer end of the YtD range on the 2-/5-/10-Year butterfly, albeit comfortably within the confines of the range that has been observed over recent months.
• Today’s payment from the maturing ACGB Jul-22 wouldn’t usually be reinvested in this line as it would be deemed to be too far out the curve, but the lack of available free float in some of the shorter dated tenors may mean that the payment has at least a residual impact when it comes to today’s auction.
• That, coupled with the recent stabilisation away from cycle cheaps and recent ACGB auction history lead us to believe that today’s auction will be easily digested.
• Results due at 0200BST/1100AEST.