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 22 November 2021 for A$300mn. The sale drew an average yield of 2.4794%, at a high yield of 2.4825% and was covered 1.9400x. There were 44 bidders, 25 of which were successful and 18 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 80.0%.

• This is a peculiar time to tap this line, given the heightened levels of volatility and reduction in market liquidity, which suggests that AOFM dealer liaison may have unearthed some demand for such issuance.
• If that is the case, we would expect smooth enough digestion, with comfortable pricing through mids, although the cover ratio may be challenged by the prevailing market conditions (anything below 3.00x in coverage terms is seen as a bit of a disappointment these days, although that is based on recency bias, given the RBA-induced auction strength that we became accustomed to after COVID broke out).
• The curve is flat, in a local, not international sense, which may erode some of the appeal that would be derived from the net cheapening observed since the middle of ’21.
• Results due at 0000GMT/1100AEDT.