AUCTION PREVIEW: ACGB June '31 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.0bn of the 1.50% 21 June 2031 Bond, issue #TB157. The line was last sold on 20 January 2020 for A$1.8bn. The sale drew an average yield of 1.0937%, at a high yield of 1.0950% and was covered 4.8639x. There were 40 bidders, 14 of which were successful and 6 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 32.9%.

• While outright cheapening, curve steepening, FX hedged yields (particularly from the perspective of a Japanese investor) and record levels of surplus cash lodged on E/S accounts at the RBA continue to provide clear potential sources of demand at auction, the recent market volatility, Fed Chair Powell's rhetoric and yesterday's RBA ACGB purchase reversion to "normal" levels may deter some from bidding as aggressively as they otherwise would have.
• Still, the fact that this round of supply represents the only ACGB auction of the week, presenting more than digestible DV01 and notional levels, coupled with the RBA's recent found flexibility re: ACGB purchases should underpin demand after the recent cheapening, meaning that the supply is digested easily enough, maintaining a run of solid ACGB auctions.
• Results due at 0000GMT/1100AEDT.