AUCTION PREVIEW: ACGB Dec-35 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.2bn of the 4.25% 21 December 2035 bond. The new line was sold via syndication on 24 July 2024 for A$11.5bn. The sale drew an average yield of 4.425%. There was a total of $56bn of bids at the final clearing price.

• This week's ACGB supply is lower than the recent average weekly issuance of around A1.5bn.
• According to the June 2024 Issuance Program Update, the AOFM plans to: conduct 2 Treasury Bond tenders most weeks; and hold 1-2 Treasury-indexed bond tenders each month. Issuance of Treasury Bonds in 2024-25 is expected to be around $90 billion. Around $2 billion will consist of Green Treasury Bond tenders.
• Several factors will likely influence today's auction bidding. The current outright yield is around 45bps lower than the late July sale.
• Also, on the negative side, the line is included in the XM basket.
• Conversely, the 3/10 yield curve is 5-10bps steeper than late July, and currently sitting near the mid-point of the range it has traded in over the past year.
• Additionally, there has been a notable improvement in sentiment towards global bonds recently. This is exemplified by the US tsy 10-year yield, which recently hit its lowest level this year, some 90bps below its April peak.
• 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 0200 BST / 1100AEST.