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 28 January 2022 for A$1.0bn. The sale drew an average yield of 1.9536%, at a high yield of 1.9575% and was covered 2.1450x. There were 37 bidders, 23 of which were successful and 18 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 4.1%.

• The space has been susceptible to the broader gyrations driven by the well-documented Russia-Ukraine tensions in recent days. This, coupled with the cheapening witnessed in early ’22 and the ample liquidity in the banking space should support takedown at the auction.
• The inclusion of the line in the XM futures basket supports headgability of the line, which is an incremental positive for takedown.
• Ultimately, we once again expect smooth enough digestion of the auction, although the cover ratio will likely remain short of extraordinary, given the cessation of the RBA’s QE purchases. The proximity to today’s Q4 WPI data (which we have touched on in earlier bullets) may also provide some modest headwinds for demand.
• Results due at 0000GMT/1100AEDT.