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 5 August 2022 for A$700mn. The sale drew an average yield of 2.8527%, at a high yield of 2.8550% and was covered 3.1400x. There were 46 bidders, 12 of which were successful, and 6 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 89.8%.

• Outright yields have moved towards, but not challenged, YtD highs in recent sessions, which is a positive for takedown in isolation, although ongoing market vol. coupled with uncertainty re: terminal interest rate levels, both at home and abroad, will likely limit demand.
• 5s continue to trade at the richer end of the YtD range on the 2-/5-/10-Year butterfly.
• Micro RV metrics indicate that the line is fairly valued.
• A$630mn of the line is currently borrowed via the RBA’s SLF, the largest amount of borrowing via the facility beyond the 3-Year zone, a positive for demand.
• Expect smooth digestion, with weighted average pricing comfortably through mids, although the previously flagged headwinds will likely cap the cover ratio.
• Results are due at 0100BST/1100AEDT.