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 1 November 2023 for A$800mn. The sale drew an average yield of 4.9521%, at a high yield of 4.9525% and was covered 3.8062x. There were 27 bidders, 7 of which were successful and 2 were allocated in full.

• This week's ACGB supply is consistent with the lower 2023-24 borrowing requirement outlined in the AOFM’s January’24 Issuance Program Update. The update followed the release of the MYEFO in December. A$50bn of Treasury Bond issuance is planned for 2023-24 (of which approximately $24bn was completed as of the end of 2023).
• The upcoming auction of the Apr-33 bond is anticipated to run smoothly, despite the current yield standing significantly lower (-90bps) than that observed at the previous auction of this bond. Recent auctions of similar maturities have been successfully executed.
• A sanguine view towards the RBA's policy outlook should positively influence the level of demand. RBA-dated OIS is currently pricing 39bps of easing by year-end.
• However, the line’s exclusion in the XM basket leaves the line in a less-loved area of the curve.
• In terms of the 3/10 yield curve, it currently sits in the bottom half of the range it has traded in since mid-November last year.
• Taking all factors into account, today's auction is expected to proceed smoothly without encountering significant issues.
• Results are due at 0000 GMT / 1100 AEST.