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 21 February 2022 for A$500mn. The sale drew an average yield of 2.3456%, at a high yield of 2.3475% and was covered 3.1600x. There were 48 bidders, 15 of which were successful and 6 were allocated in full. Amount allotted at the highest yield as a percentage of amount bid at that yield was 41.9%.

• The RBA’s concession that is moving nearer to a pause, coupled with outright yields levels, should result in smooth digestion of today’s auction.
• The line looks quite cheap in a micro-RV sense, although the fact that there will be a syndication of a new ACGB Dec-34 at some point in the Apr-Jun quarter could mean that stays the case for some time.
• Also note that there is less than A$10bn of the line on issue at present (pre-auction), which will mean that there will be some need to bring the bond ‘up to size’ as it moves towards 10-Year futures basket status, this is another factor contributing to its relative cheapness.
• All in, look for smooth enough takedown of the line, even given the above headwinds.
• The time passed since the previous auction means that the statistics from the previous auction provide little comparable use.
• Results due at 0000GMT/1100AEDT.