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 11 May 2022 for A$400mn. The sale drew an average yield of 3.8326%, at a high yield of 3.8350% and was covered 2.0775x. There were 54 bidders, 27 of which were successful and 18 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 74.4%.

• The AOFM taps the longest maturity bond on issue at present, with some desks flagging attractive entry levels vs. swap as a potential entry point.
• We also suggest that the recent stabilisation in wider core FI markets, below cycle peaks in yield terms, should benefit demand at auction, particularly when you factor in the long duration of the line.
• We also note that the fact that the AOFM is returning to market with the line so quickly after the previous tap may mean that dealer demand has been unearthed via the Agency’s liaison scheme.
• While the potential bidder pool may be limited, those that want access to the line may be willing to pay up.
• Overall, we expect a smooth auction, comfortably through mids, although the cover ratio may not be particularly strong.
• Results due at 0200BST/1100AEST