AUCTION PREVIEW: ACGB Jun-51 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$300mn of the 1.75% 21 June 2051 Bond, issue #TB162. The line was last sold on 28 June 2021 for A$300mn. The sale drew an average yield of 2.3718%, at a high yield of 2.3750% and was covered 3.5233x. There were 56 bidders, 12 of which were successful and 7 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 44.8%.

• A hard one to explain in terms of why the AOFM has chosen to issue the line now. Perhaps it is trying to tweak average duration aided by the uptick in yields in play since September, perhaps it is just keeping up with the every-so-often mantra of issuance in line. Whatever it may be, the AOFM has stepped up issuance in the last couple of weeks, maybe to rebuild cash buffers and maybe as we move towards the maturity of ACGB Dec-21.
• Questions re: the demand witnessed at Monday auctions continue to do the rounds, given that this is the most illiquid time for the AOFM to issue when considering the broader global market backdrop. DV01 on offer is ~A$573K, with the potential for the duration bid at the tailend of last week to offer some cushion for supply.
• In the background the trifecta of negative RBA-adjusted net ACGB supply, liquidity levels in the domestic banking system and the international relative appeal continue to provide demand for ACGBs.
• Outright, the line sits ~30bp richer than the multi-month cheaps printed in late Oct, while the 5-/30-Year yield spread has edged away from flats printed on Nov 12, but is still running ~40bp flatter YtD and ~80bp flatter than the YtD peak.
• Results due at 0000GMT/1100AEDT.