AUCTION PREVIEW: ACGB Dec-34 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 3.50% 21 December 2034 bond, issue #TB168. The line was last sold on 9 September 2023 for A$700bn. The last sale drew an average yield of 4.1956%, at a high yield of 4.1975% and was covered 4.2014x. There were 52 bidders, 18 of which were successful and 9 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 32.1%.

• The previous round of ACGB Dec-34 supply saw the recent run of strong pricing at ACGB auctions continue with the weighted average yield printing 0.8bp through prevailing mids. The cover ratio also moved higher to 4.2014x from 3.5187x at the 17 July auction. The large number of overall and successful bidders highlighted the strength of the demand.
• The bidding at today’s auction is likely to be influenced by several factors, including a higher outright yield and a steeper yield curve than the 9 September auction. That said, the outright yield is around 50bps lower and the curve 20bps flatter than their respective early November highs.
• A sanguine view towards the RBA's policy outlook and the line’s inclusion in the XM basket are also likely to influence the level of demand.
• It is important to acknowledge that sentiment towards longer-dated global bonds has improved dramatically in November, as reflected in stronger than expected demand seen at recent 20-year auctions for US tsys and JGBs.
• While there are factors that may constrain the overall strength of bidding, there is an expectation for continued firm pricing at today’s auction.
• Results are due at 0000 GMT / 1100 AEST.