AUCTION PREVIEW: ACGB June '31 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 1.50% 21 June 2031 Bond, issue #TB157. The line was last sold on 7 July 2021 for A$1.0bn. The sale drew an average yield of 1.3320%, at a high yield of 1.3350% and was covered 3.6700x. There were 43 bidders, 23 of which were successful and 14 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 50.0%.

• The ongoing COVID headwinds for Australia and the broader macro backdrop have driven the line to the outright richest levels witnessed since February. The line is hovering a little above the recent richest levels in terms of the 5-/10-/15-Year butterfly.
• Nonetheless, the continued backdrop of net-negative RBA purchase adjusted weekly ACGB supply, record levels of liquidity in the domestic banking system and international relative value appeal should result in a relatively smooth takedown at today's auction.
• In terms of idiosyncrasies, even though the line benefits from inclusion in the XMU1 Basket, and related hedgeability, it has struggled when compared to surrounding lines in terms of demand at auctions (as measured by the recent trends of pricing through prevailing mids at the time of supply).
• Results due at 0200BST/1100AEST.