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 31 May 2023 for A$300mn. The sale drew an average yield of 4.1058%, at a high yield of 4.1125% and was covered 2.2833x. There were 56 bidders, 25 of which were successful and 21 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 16.7%.

• A slightly reduced outright yield, a flatter yield curve, and minor relative value richness between the Mar-47 and Jun-51 bonds could present challenges for the auction takedown of the longest bond currently on issue.
• Uncertainty regarding the RBA policy outlook ahead on the release of May’s CPI Monthly data may also weigh on the bid.
• On a positive note, this week's ACGB supply continues the recent run of relatively low issuance, consistent with the more favourable fiscal backdrop outlined in the Federal Budget.
• Additionally, the yield differential between the Australian and US 30-year bonds is currently positioned near the upper end of the 0-45bp range that has been observed since December. This favourable spread could attract offshore demand and assist mitigation of the aforementioned potential negative factors impacting demand.
• Overall, we expect continued firm pricing at today’s auction, although the factors mentioned above could constrain the overall strength of bidding.