AUCTION PREVIEW: ACGB Dec-30 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 1.00% 21 December 2030 bond. The line was last sold on 21 July 2021 for A$800mn. The sale drew an average yield of 1.1233%, at a high yield of 1.1250% and was covered 5.4125x. There were 47 bidders, 17 of which were successful and 8 were allocated in full.

• Given that the most recent auction for the Dec-30 line took place in July 2021, comparing it with the previous result may lack relevance.
• However, on 10 May 2023, the Apr-29 bond was offered for A$800 million, showing solid demand metrics with a cover ratio of 3.3375x.
• Although the outright level of the line is comfortably above recent rich levels (4.09% versus 3.74% in late December), it is still some way away from being included in the YM basket, leaving it in the unloved zone of the yield curve.
• The richness of the belly vs. 2s and 10s may also present a hurdle for demand, given that it is just above cycle extremes.
• Ultimately, it is expected that recent firm pricing at auctions will continue, although the above-mentioned issues may limit the overall strength of bidding.
• Results are due at 0000 GMT/1100 AEDT.