AUCTION PREVIEW: ACGB Jun-31 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 1.50% 21 June 2031 Bond, issue #TB157. The line was last sold on 4 March 2022 for A$1.0bn. The sale drew an average yield of 2.1597%, at a high yield of 2.1625% and was covered 3.1650x. There were 38 bidders, 16 of which were successful and 7 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 45.7%.

• Those of a more dovish disposition, at least when compared to market pricing of the current RBA tightening cycle, could be emboldened by the recent stabilisation in wider global bond markets, with yields still very elevated vs. late ‘21/early ’22 levels, but off of cycle highs. This should result in solid enough demand when it comes to auction
• The domestic 3-/10-Year yield curve is ~15bp off cycle flats and shouldn’t be too much of an inhibitant when it comes to today’s auction.
• The ~50bp outright yield premium of 10-Year ACGBs vs. their U.S. counterpart should also attract a baseline level of cross-market demand, with wider bond market volatility off of highs and broader global recession fears starting to get wider airtime in recent weeks.
• XMM2 basket bond status should also aid demand, given the hedgability of the line.
• Once again, we expect the auction to price comfortably through prevailing mids.
• Results due at 0200BST/1100AEST.