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 10 November 2021 for A$1.0bn. The sale drew an average yield of 1.7001%, at a high yield of 1.7025% and was covered 2.5950x. There were 39 bidders, 16 of which were successful and 10 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 44.3%.

• The risk aversion surrounding the Ukraine-Russia conflict has helped bonds edge away from their cycle cheaps, with the lack of further extension in yield terms, combined with the increased risk aversion and the consolidation of most of the well-documented cheapening providing a sound footing for an auction. Still, worries re: the inflationary impact of the conflict are clearly elevated, which may prevent demand from being as strong as it could be.
• The headgability of the line (which forms part of the XMH2 basket) should also provide a marginal boost for demand.
• Relatively, the flat curve (in a local sense) shouldn’t be too much of an impediment, although 10s aren’t particularly attractive on the likes of the 5-/10/-15-Year butterfly structure. Once again, this is a marginal headwind for demand.
• Results due at 0000GMT/1100AEDT.