AUCTION PREVIEW: ACGB Apr-29 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$900mn of the 3.25% 21 April 2029 bond, issue #TB138. The line was last sold on 8 May 2024 for A$800mn. The sale drew an average yield of 3.9486%, at a high yield of 3.9500% and was covered 4.1250x. There were 41 bidders, 18 of which were successful and 8 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 66.7%.

• This week's ACGB supply falls at the upper end of the usual weekly issuance range, with A$600mn of the 3.50% 21 December 2034 bond also to be offered on Wednesday. Based on Budget forecasts, issuance of Treasury Bonds (including Green Treasury Bonds) in 2024-25 is expected to be around $90 billion. In 2023-24, issuance of Treasury Bonds will be around $50 billion.
• The current outright yield for this line is around the level observed at the 8 May auction and approximately 65bps lower than the cycle high of 4.60% set in early November.
• Several factors could negatively influence the bidding at today’s auction. First, the 3/5 yield curve is near its flattest this year. Secondly, the line is not included in the YM or XM basket and therefore sits in a less preferred area of the curve.
• Thirdly, ACGBs have been heavy since the RBA’s hawkish hold last Tuesday, when the bank considered a hike but not a cut.
• On the positive side, however, it is important to acknowledge that the sentiment towards global bonds has improved over recent weeks.
• Results are due at 0200 BST / 1100 AEST.