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 12 April 2023 for A$800mn. The sale drew an average yield of 3.0282%, at a high yield of 3.0325% and was covered 2.3700x. There were 40 bidders, 20 of which were successful and 14 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 19.1%.

• This week's round of nominal ACGB issuance is relatively low, with this being the only conventional ACGB supply. This reflects a more favourable fiscal backdrop, as outlined in yesterday's Federal Budget. In 2022-23, the issuance of Treasury Bonds will be around A$80 billion versus A$95bn announced in the October Budget 2022-23 update.
• Although the outright level of the line is comfortably above recent rich levels, it is still some way away from being included in the YM basket, leaving it in the unloved zone of the yield curve.
• The richness of the belly vs. 2s and 10s may also present a hurdle for demand, given that it is at cycle extremes.
• Ultimately, it is expected that recent firm pricing at auctions will continue, although the above-mentioned issues may limit the overall strength of bidding.
• Results are due at 0200BST/1100AEST.