AUCTION‌ ‌PREVIEW:‌ ‌ACGB Jun '31 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.0bn of the 1.50% 21 June 2031 Bond, issue #TB157. The line was last sold on 19 May 2021 for A$1.2bn. The sale drew an average yield of 1.7156%, at a high yield of 1.7175% and was covered 2.8292x. There were 36 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 28.3%.

• The tapering of the RBA's bond purchases from early September through mid-November (with the potential for a decision to be made re: another step lower at the Bank's November meeting) means that RBA-adjusted net ACGB issuance remains negative over that horizon, but less so than is the case at present.
• The recent flattening of the 3-/10-Year ACGB curve (to multi-month lows) makes today's auction a little less attractive in relative value terms, while the overnight rally in the space (with the line moving to multi-month richest levels in outright terms) takes away some of the outright appeal.
• Still, the excess liquidity in the market and the aforementioned RBA-adjusted purchase dynamic should underscore demand. The hedgability of the line (which forms part of the XMU1 bucket) should also support takedown.
• Results due at 0200BST/1100AEST.