AUCTION PREVIEW: ACGB Apr-29 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$500mn of the 3.25% 21 April 2029 Bond, issue #TB138. The line was last sold on 19 October 2022 for A$800mn. The sale drew an average yield of 3.7426%, at a high yield of 3.7450% and was covered 2.8062x. There were 47 bidders, 14 of which were successful and 8 were allocated in full. Amount allotted at the highest yield as a percentage of amount bid at that yield was 84.1%.

• Outright yields operate ~10bp above their YtD base after the line richened by ~70bp in early ’23 trade. Current yield levels should provide enough of an incentive for supply to clear smoothly, even accounting for the uncertainty generated by the firmer than expected Q4 CPI release, with household debt levels and consumer consumption key for the RBA’s reaction function re: its terminal rate. Investors looking for a fairly swift end to the hiking cycles at the major global central banks should also aid demand.
• The zone looks a little rich on most wider butterfly structures, although operates within the ranges observed in recent months (and the sector can be particularly sensitive to central bank expectations).
• There is a relatively modest amount of the bond borrowed via the RBA’s SLF (under A$100mn at the last count), pointing to some underlying demand for access to the line, which should further support the auction.
• All in, we should see smooth enough digestion of today’s auction.
• Results due at 0000GMT/1100AEDT.