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The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 1.00% 21 December 2030 Bond, issue #TB160. The line was last sold on 10 May 2021 for A$1.0bn. The sale drew an average yield of 1.5984%, at a high yield of 1.6000% and was covered 2.4560x. There were 40 bidders, 15 of which were successful and 9 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 92.2%.

  • The recent richening provides an outright valuation hurdle for supply to clear, although the abundant liquidity in the domestic banking system, potential for the RBA to walk back its tapering decision in light of the local COVID backdrop, international relative appeal and hedgability of the line owing to XMU1 basket inclusion should mean that the auction passes smoothly enough. The more than digestible DV01 on offer also plays into this theme.
  • There are also some domestic relative value issues to overcome. This zone of the curve has richened a little vs. say 5s and 10s, with swap spreads moving back towards their recent wides. Still, the previously outlined supportive factors should outweigh this.
  • Further out, AOFM issuance dynamics will be eyed, with longer lockdowns in the likes of NSW & Victoria likely to = an uptick in issuance.
  • Results due at 0200BST/1100AEST.