AUCTION PREVIEW: ACGB Apr-27 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 4.75% 21 Apr 2027 Bond, issue #TB136. The line was last sold on 15 July 2022 for A$700mn. The sale drew an average yield of 3.1454%, at a high yield of 3.1525% and was covered 3.9929x. There were 41 bidders, 4 of which were successful, and 2 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 38.1%.

• The recent stabilsation away from outright cycle cheaps and the more than digestible A$321K DV01 on offer should mean that this auction adds to the recent run of smoothly digested ACGB supply.
• Note that the fact that the line is still borrowed via the RBA’s SLF (albeit in a relatively limited A$206mn) indicates broader demand for access to the line, which should underpin the auction further.
• The line may look a little cheap on some micro-RV optics, although the fact that it is not yet included in the 3-Year futures basket is skewing those optics, meaning it isn’t likely to be quite as cheap as some metrics suggest.
• 5s also look rich on the 2-/5-/10-Year butterfly, although this shouldn’t be too much of an impediment when it comes to today’s auction, given the previously outlined supportive factors.
• Results are due at 0200BST/1100AEST.