AUCTION PREVIEW: ACGB Apr-29 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 3.25% 21 April 2029 bond, issue #TB138. The line was last sold on 3 February 2023 for A$500mn. The sale drew an average yield of 3.1922%, at a high yield of 3.1975% and was covered 3.7800x. There were 42 bidders, 10 of which were successful and 6 were allocated in full. Amount allotted at the highest yield as a percentage of amount bid at that yield was 95.0%.

• Another relatively low round of nominal ACGB issuance on the week (this is the only round of conventional ACGB supply this week), with the impending ACGB Dec-34 syndication (at some point in the coming quarter), holiday-shortened week and the more favourable fiscal backdrop that Australia finds itself in (vs. the government’ s own baseline expectations) all factoring in to the recent stepdown in the AOFM’s issuance run rate.
• The line is some way away from YM basket inclusion, leaving it in the unloved zone of the curve, which may mean that the micro-RV cheapness observed on some metrics is less meaningful than it would be in other cases.
• Outright, the line hovers just above recent richest levels, which shouldn’t be too much of an impediment when it comes to smooth passage of supply, while the richness of the belly vs. 2s and 10s has moved off cycle extremes.
• Ultimately, expect the recent run of firm pricing at auctions to continue, although the issues headlined above may limit the overall strength of bidding.
• Results due at 0200BST/1100AEST.