AUCTION PREVIEW: ACGB Apr-33 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.0bn of the 4.50% 21 April 2033 Bond, issue #TB140. The line was last sold on 20 October 2021 for A$1.5bn. The sale drew an average yield of 1.8291%, at a high yield of 1.8300% and was covered 3.0267x. There were 44 bidders, 21 of which were successful and 9 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 75.2%.

• Weekly AOFM issuance remains heavy, at least by recent standards, particularly in the short end, as the AOFM rebuilds its cash buffers, with this line representing the only real duration offering of the week.
• Market conditions have become a little more challenging, as a more hawkish Fed contests with the discovery and early spread of the Omicron COVID strain, reverberating around the global fixed income landscape.
• Still, you would expect the domestic liquidity backdrop, international relative value appeal and negative RBA purchase-adjusted net supply dynamic to ultimately facilitate the smooth takedown of the auction (although the auction may not be firm by recent standards given the prevailing market conditions).
• The recent curve flattening limits the relative value appeal of the auction from a domestic perspective, while swap spreads hover just shy of the recent wides (aided by hedging flows and seemingly a degree of bond scarcity in the shorter end).
• The line doesn’t quite fall into the XMZ1 basket but does form part of the underlying for XMH2.
• Results due at 0000GMT/1100AEDT.