AUCTION PREVIEW: ACGB Apr-27 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 4.75% 21 April 2027 bond. The line was last sold on 14 October 2022 for A$700mn. The sale drew an average yield of 3.6747%, at a high yield of 3.6800% and was covered 3.25x. There were 45 bidders, 18 of which were successful and 12 were allocated in full.

• This week's ACGB supply is consistent with the lower 2023-24 borrowing requirement outlined in the AOFM’s January’24 Issuance Program Update. The update followed the release of the MYEFO in December.
• Considering that the most recent auction for the Apr-27 line occurred in October 2022, comparing it with the previous result may lack relevance.
• However, on February 7th, the Nov-28 bond was offered for A$800mn. The results of that auction revealed solid demand metrics, with a cover ratio of 3.3687x.
• Given that the outright level of the line comfortably resides within the range it has maintained throughout the year and that the line is part of the YM basket, there is an expectation that the recent firm pricing observed at ACGB auctions will persist.
• A sanguine view towards the RBA's policy outlook, after the removal of the explicit tightening bias at the March meeting, should also positively influence the level of demand. RBA-dated OIS is currently pricing 32bps of easing by year-end.
• Results are due at 0200 BST/1100 AEDT.