AUCTION PREVIEW: ACGB Apr-33 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 4.5% 21 April 2033 Bond, issue #TB140. The line was last sold on 27 July 2023 for A$700mn. The sale drew an average yield of 4.0371%, at a high yield of 4.040% and was covered 3.700x. There were 53 bidders, 26 of which were successful and 15 were allocated in full.

• The upcoming auction of the Apr-33 bond is anticipated to run smoothly, with the current yield standing significantly higher (+90bps) than those observed in the previous auction of this bond. Recent auctions of similar maturities have been successfully executed.
• However, there may be some apprehension in the market regarding RBA terminal rate expectations leading up to next week's RBA policy decision, which could potentially limit the bidding activity.
• Furthermore, offshore demand might not offer substantial support today, given that US Treasury and JGB 10-year yields are approximately 100bps and 50bps higher, respectively, than they were at the previous auction. The AU-US 10-year yield differential presently resides within the middle of the +/-30bp range it has maintained since October.
• Nonetheless, the 45bp steepening of the cash curve since the July auction could serve as a favourable factor for demand.
• Taking all factors into account, while there are considerations that could influence the demand for the Apr-33 bond auction, it is expected to proceed smoothly without encountering significant issues.
• Results are due at 0000 GMT / 1100 AEST.