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AUCTION PREVIEW: ACGB Dec-34 Supply Due

AUSSIE BONDS
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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 28 August 2024 for A$800bn. The last sale drew an average yield of 3.9148%, at a high yield of 3.9175% and was covered 2.3125x. There were 34 bidders, 21 of which were successful and 14 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 38.8%.

  • This week's ACGB supply is at the recent average weekly issuance, with A$700mn of the 2.75% 21 November 2028 bond issued on Monday.
  • According to the June 2024 Issuance Program Update from the Australian Office of Financial Management (AOFM), the strategy includes conducting two Treasury Bond tenders most weeks and holding one to two Treasury-indexed bond tenders monthly. For the 2024-25 period, total issuance is expected to reach around A$90 billion, with approximately A$2 billion allocated for Green Treasury Bonds.
  • 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 through prevailing mids. However, the lower outright yield did appear to hamper the overall strength of bidding, with the cover ratio declining to 2.3125x from 2.7375x in mid-August and 4.2250x at the June auction.
  • Several factors will likely influence today's auction bidding. The current outright yield is around 60-65bps higher than the mid-August auction but still approximately 45bps lower than the November peak.
  • Moreover, the 3/10 yield curve is 10bps steeper than during mid-August’s auction, and currently sitting at its steepest since November 2023.
  • Also on the positive side, the line is included in the XM basket.
  • However, there has been a notable deterioration in sentiment towards global bonds recently. This is exemplified by the US tsy 10-year yield, which is around 70bps above its September low.
  • While some factors may limit the overall strength of bidding, there is an expectation of continued firm pricing at today's auction.
  • Results are due at 0000 GMT / 1100AEST.
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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 28 August 2024 for A$800bn. The last sale drew an average yield of 3.9148%, at a high yield of 3.9175% and was covered 2.3125x. There were 34 bidders, 21 of which were successful and 14 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 38.8%.

  • This week's ACGB supply is at the recent average weekly issuance, with A$700mn of the 2.75% 21 November 2028 bond issued on Monday.
  • According to the June 2024 Issuance Program Update from the Australian Office of Financial Management (AOFM), the strategy includes conducting two Treasury Bond tenders most weeks and holding one to two Treasury-indexed bond tenders monthly. For the 2024-25 period, total issuance is expected to reach around A$90 billion, with approximately A$2 billion allocated for Green Treasury Bonds.
  • 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 through prevailing mids. However, the lower outright yield did appear to hamper the overall strength of bidding, with the cover ratio declining to 2.3125x from 2.7375x in mid-August and 4.2250x at the June auction.
  • Several factors will likely influence today's auction bidding. The current outright yield is around 60-65bps higher than the mid-August auction but still approximately 45bps lower than the November peak.
  • Moreover, the 3/10 yield curve is 10bps steeper than during mid-August’s auction, and currently sitting at its steepest since November 2023.
  • Also on the positive side, the line is included in the XM basket.
  • However, there has been a notable deterioration in sentiment towards global bonds recently. This is exemplified by the US tsy 10-year yield, which is around 70bps above its September low.
  • While some factors may limit the overall strength of bidding, there is an expectation of continued firm pricing at today's auction.
  • Results are due at 0000 GMT / 1100AEST.