AUCTION PREVIEW: ACGB Jun-35 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$500mn of the 2.75% 21 June 2035 Bond, issue #TB145. The line was last sold on 19 January 2022 for A$500mn. The sale drew an average yield of 2.1526%, at a high yield of 2.1550% and was covered 2.2480x. There were 38 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 27.8%.

• We have discussed the liquidity situation and recent yield pickup in detail on many occasions previously, with those factors, coupled with the recent, at least partially Ukraine-related stabilisation in the space set to support demand this time out. The line doesn’t form part of the XM futures basket, which makes it a little less hedgable, although the line looks a little cheaper than some of the nearby bonds a result, which provides some counter to the lack of headgability. Ultimately, we expect the smooth passage of auction, pricing should be comfortably through mids, while the cover ratio should be solid if not remarkable (this area of the curve doesn’t haven’t the same sort of collateral shortage/SLF usage demand as say the 2- to 5-Year sector).
• Results due at 0000GMT/1100AEDT.