AUCTION PREVIEW: ACGB Apr-33 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 4.5% 21 April 2033 Bond, issue #TB140. The line was last sold on 3 May 2023 for A$800mn. The sale drew an average yield of 3.3617%, at a high yield of 3.3650% and was covered 4.1063x. There were 45 bidders, 26 of which were successful and 16 were allocated in full.

• The upcoming auction of the Apr-33 bond is expected to proceed without major issues, with the current yield levels being considerably higher than that seen at the previous auction of this bond. Similar maturities have been smoothly supplied at similar outright yield levels in recent times.
• A more sanguine market view about the RBA terminal rate expectations after this week’s Q2 CPI release should also assist the bid.
• Offshore demand may receive some assistance from an AU-US 10-year yield differential that is currently positioned closer to the upper end of the +/-30bp range it has traded in since October.
• The flatness of the cash curve, which is slightly above cycle lows, could however create some headwinds for demand.
• All in all, although certain factors could potentially influence demand for the Apr-33 bond auction, it is expected to proceed smoothly without any significant issues.
• Results are due at 0200 BST / 1100 AEST.