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AUCTION PREVIEW: ACGB Jun-51 supply Due

AUSSIE BONDS

The Australian Office of Financial Management (AOFM) will today sell A$400mn of the 1.75% 21 June 2051 Bond, issue #TB162. The line was last sold on 1 April 2022 for A$300mn. The sale drew an average yield of 3.2119%, at a high yield of 3.2175% and was covered 2.0133x. There were 39 bidders, 23 of which were successful and 16 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 36.0%.

  • The slight upsizing of the amount on offer vs. the 2 previous auctions of the line (both of which saw A$300mn offered) is interesting, given the well-documented financial market volatility, questions around the terminal rate in, and velocity of, the RBA’s current tightening cycle and general inflationary worry. Note that the previous auction of the line barely managed to top 2.00x in cover ratio terms.
  • Market volatility seems to be keeping many prospective international investors sidelined re: ACGBs, even with attractive yield pickup on offer.
  • Some desks suggest that the above mix of factors raise the risk of a tail at today’s auction, which would represent a very rare event in the recent history of ACGB auctions (at least in the time since RBA QE was implemented). Even if there isn’t a tail, the spread between the weighted average yield and high yield will be eyed.
  • Swap spreads shouldn’t impact demand, while outright valuations are within 10bp of the recently registered cheaps. In relative terms, the 5-/30-Year ACGB curve sits ~20bp off the multi-year flats seen earlier this year.
  • Results due at 0200BST/1100AEST.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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