AUCTION PREVIEW: ACGB Apr-27 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$300mn of the 3.75% 21 Apr 2037 Bond, issue #TB144. The line was last sold on 1 Feb 2019 for A$400mn. The sale drew an average yield of 2.5517%, at a high yield of 2.5550% and was covered 2.6000x. There were 50 bidders, 21 of which were successful, and 21 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 100.0%.

• Note that the previous auction results provide little in the way of comparative use given the time that has elapsed since the previous auction of this line.
• The recent stabilsation off of outright cycle cheaps Is a positive for the auction, although the early cheapening witnessed this week is a potential headwind for demand.
• The AOFM may have unearthed some demand for the line via its dealer liaison scheme, which would be a positive for demand.
• Still, the uptick in DV01 on offer via the AOFM during this week and the Monday timing of the auction (most illiquid time of the week for global markets) present incremental headwinds.
• Desks have flagged a lack of meaningful relative value for the line, which is trading roughly in line with the wider estimates of the fitted curve.
• Also note that the likes of the 5-/15- & 10-15-Year Aussie curves trade towards the flatter end of the ranges observed in recent years.
• All in the auction should pass smoothly enough (with pricing comfortably through prevailing mids), although the aforementioned headwinds may limit demand from being quite as strong as it would otherwise would have been, perhaps weighing on the cover ratio.
• Results are due at 0200BST/1100AEST.