AUCTION PREVIEW: ACGB Apr-37 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$600mn of the 3.75% 21 April 2037 bond. The line was last sold on 21 February 2024 for A$800mn. The sale drew an average yield of 4.2872%, at a high yield of 4.2900% and was covered 2.7875x. There were 44 bidders, 21 of which were successful and 13 were allocated in full.

• This week's ACGB supply falls at the upper end of the recent weekly issuance range, with the sale of A$900mn of the 2.25% 21 May 2028 bond due on Friday. Based on Budget forecasts, issuance of Treasury Bonds (including Green Treasury Bonds) in 2024-25 is expected to be around $90 billion. In 2023-24, issuance of Treasury Bonds will be around $50 billion.
• Bidding at today’s auction is likely influenced by several factors. The outright yield is approximately 20bps higher than at the February auction but about 60bps lower than the November high.
• Conversely, the 3/10 yield curve is around 15bps flatter than at the February auction and 20bps flatter than the late October high.
• The RBA’s relatively hawkish stance at the June meeting and May’s higher-than-expected CPI may also negatively impact demand. RBA-dated OIS indicates a 44% chance of a 25bp hike in August.
• Additionally, the exclusion of this line from the XM basket and the recent decline in sentiment towards global bonds are noteworthy factors.
• Results are due at 0200 BST / 1100AEST.