AUCTION PREVIEW: ACGB May-28 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 2.25% 21 May 2028, issue #TB149. The line was last sold on 5 July for A$900mn. The sale drew an average yield of 4.1383%, at a high yield of 4.1400% and was covered 4.0778x. There were 33 bidders, 3 of which were successful and 2 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 75%.

• The last outing for the May-28 bond continued the recent trend of strong demand at ACGB auctions, with the weighted average yield printing through prevailing mids and the cover ratio rising to 4.0778x compared to 3.875x at the November 15 auction.
• However, several factors could negatively influence bidding at today’s auction. Firstly, the May-28 bond's outright yield is 50-55bps lower than in July and 90bps lower than the cycle peak in early November last year.
• Secondly, the RBA presents a less dovish bias than other central banks, with a rate hike considered at its most recent meeting.
• On the positive side, it's important to note that the May-28 bond is included in the YM basket and that sentiment towards global bonds has improved in recent months. Additionally, the 3/5 yield curve has steepened since the July auction.
• Overall, another round of well-received supply is expected.
• Results are due at 0200 BST / 1100 AEST.