AUCTION PREVIEW: ACGB Jun-51 Supply Due

The Australian Office of Financial Management (AOFM) will sell A$300mn of the 1.75% 21 June 2051 bond today, issue #TB162. The line was last sold on 28 June 2023 for A$300mn. The sale drew an average yield of 4.1617%, at a high yield of 4.1675% and was covered 2.2033x. There were 51 bidders, 20 of which were successful and 15 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 85.4%.

• This week's ACGB supply is around the recent average weekly issuance range, with A$500mn of the 3.00% 21 November 2033 bond also due on Wednesday and A$700mn of the 2.75% 21 November 2027 bond on Friday.
• According to the June 2024 Issuance Program Update, the AOFM plans to: issue a new December 2035 Treasury Bond by 30 September 2024 (by syndication and subject to market conditions); conduct 2 Treasury Bond tenders most weeks; and hold 1-2 Treasury Indexed Bond tenders each month. Issuance of Treasury Bonds in 2024-25 is expected to be around $90 billion. Around $2 billion will consist of Green Treasury Bond tenders.
• The bidding at today’s auction is likely to be influenced by several factors. The outright yield is around 60bps higher than the June 2023 auction level but around 60bps lower than the November high.
• The 3/30 yield curve is around 40bps steeper than the June 2023 offering but sits close to the middle of the range it has traded in over the past 12 months.
• The RBA’s relatively hawkish stance at the June meeting and May’s higher-than-expected CPI may negatively impact demand.
• It is also important to acknowledge that the sentiment towards longer-dated global bonds has improved over the past month.
• While there is an expectation for continued firm pricing at auctions, the above factors could constrain the overall strength of bidding.
• Results are due at 0200 BST / 1100AEST.