AUCTION PREVIEW: ACGB May-32 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 1.25% 21 May 2032 Bond, issue #TB158. The line was last sold on 16 Sep 2022 for A$800mn. The sale drew an average yield of 3.6790%, at a high yield of 3.6825% and was covered 2.4825x. There were 40 bidders, 21 of which were successful, and 14 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 4.1%.

• The outright stabilisation away from cycle cheaps is a positive for demand, although the ongoing market volatility and general unwillingness when it comes to international investors deploying capital into ACGBs remain negatives.
• The slower pace of RBA tightening will be welcomed and could boost demand.
• The line looks rich in a micro sense, with the legacy of the bond being the previous benchmark 10-Year ACGB at the core of that dynamic.
• The wider 3-/10-Year curve continues to operate around cycle flats, while the likes of the 5-/10-/15-Year butterfly operates around the middle of its recent range, pointing to a lack of compelling relative value.
• Overall, the recent run of smooth ACGB auction digestion and capped bid/cover should persist.
• Results are due at 0100BST/1100AEDT.