AUCTION‌ ‌PREVIEW:‌ ‌ACGB May '32 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.0bn of the 1.25% 21 May 2032 Bond, issue #TB158. The line was last sold on 26 May 2021 for A$1.0bn. The sale drew an average yield of 1.6838%, at a high yield of 1.6850% and was covered 3.6600x. There were 36 bidders, 13 of which were successful and 6 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 54.7%.

• Market volatility contends with the wall of excess liquidity evident in the domestic system at today's auction.
• Most desks seem to expect the auction to price comfortably through prevailing mids (as has been the norm in recent times) but the recent market vol. may limit the cover ratio (although this is by no means certain).
• 10-Year swap spreads have move back from the recent wides, removing some relative valuation headwinds, although 10s have richened on the 5-/10-/15-Year butterfly over the same horizon, with the belly of the curve struggling on questions surrounding both RBA & Fed monetary policy.
• Still, the aforementioned and well-documented liquidity situation, coupled with the hedgibility of the line owing to its XMU1 basket status should mean the auction passes without too much of a fuss.
• Results due at 0200BST/1100AEST.