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 24 September 2021 for A$1.0bn. The sale drew an average yield of 1.3348%, at a high yield of 1.3375% and was covered 4.3550x. There were 45 bidders, 23 of which were successful and 12 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 18.7%.

• The RBA facilitated a solid enough round of ACGB supply last week, with smooth passage once again set to be observed in this week's auctions. The market operates in a smoother fashion vs. a couple of weeks ago, while the well-discussed trifecta of record excess liquidity in the domestic banking system, international relative appeal and negative RBA-purchase adjusted net supply dynamics still very much present in the background.
• Outright yields have retraced from the recent highs, although remain above the levels witnessed in the July-September window.
• Hedgability of the line via the XM futures contract will further facilitate takedown.
• Still, the recent round of volatility may provide some limitations to the risk taking capability of dealer books, which will likely have an incremental impact on the overall strength of the auction.
• Relative value plays aren't as enticing as a pure outright plays, with the 5-/10-/15-Year butterfly operating a little off the recent lows, while the 3-/10-Year spread has exhibited similar price action.
• Results due at 0000GMT/1100AEDT.