AUCTION PREVIEW: ACGB Apr-37 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 3.75% 21 April 2037 bond. The line was last sold on 6 December 2023 for A$700mn. The sale drew an average yield of 4.3981%, at a high yield of 4.4000% and was covered 2.9143x. There were 40 bidders, 10 of which were successful and 10 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 bidding at today’s auction is likely to be influenced by several factors. The outright yield is around 10bps lower than the level at the December auction and approximately 80bps lower than the November high. Whereas, the 3/10 yield curve is around a similar level to December’s auction levels but 10-15bps flatter than the late October high.
• The line’s exclusion in the XM basket and the RBA’s retention of its tightening bias at the February meeting are also likely to influence the level of demand. Nevertheless, RBA-dated OIS still prices 41bps of easing by year-end.
• It is also important to acknowledge that the positive sentiment towards longer-dated global bonds has started to wane.
• Results are due at 0000 GMT / 1100 AEST.