AUCTION PREVIEW: ACGB Apr-29 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 3.25% 21 April 2029 Bond, issue #TB138. The line was last sold on 12 Feb 2021 for A$1.0bn. The sale drew an average yield of 0.9258%, at a high yield of 0.9275% and was covered 4.7750x. There were 32 bidders, 12 of which were successful, and 4 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 47.8%.

• The line sits on the “awkward” part of the curve, not falling into futures baskets, leaving the line in the theoretical no man’s land when it comes to relative valuations. If anything, the line looks a little rich vs. slightly shorter-dated paper included in the 5-Year futures basket (which is subject to less liquidity premium than either YM or XM futures).
• There is some demand for access to the line, as evidenced by the limited borrowing via the RBA’s SLF (A$106mn at the last count), therefore dealer liaison may have unearthed some demand (although perhaps not to the tune of a A$700mn auction).
• Ultimately, we should see a similar pattern to recent auction, with the weighted average yield comfortably through mids, while the cover ratio is the main swing variable, given the lack of international participation on the back of uncertainty surrounding the RBA’s tightening cycle. Still, the recent stabilsaiton of core global FI markets away from cycle cheaps and the outright level of yields should attract a baseline level of demand.
• Results are due at 0200BST/1100 AEST.