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AUCTION PREVIEW: ACGB May-34 Supply Due

AUSSIE BONDS
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The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 3.75% 21 May 2034 bond, issue #TB167. The line was last sold on 2 February 2024 for A$800bn. The last sale drew an average yield of 3.9790%, at a high yield of 3.9800% and was covered 3.1125x. There were 33 bidders, 15 of which were successful and 5 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 52.6%.

  • This week's ACGB supply is consistent with the lower 2023-24 borrowing requirement outlined in the AOFM’s January’24 Issuance Program Update. The update followed the release of the MYEFO in December. A$50bn of Treasury Bond issuance is planned for 2023-24 (of which approximately $24bn was completed as of the end of 2023).
  • The bidding at today’s auction is likely to be influenced by several factors. The outright yield is around 15bps higher than the early February auction level but around 80bps lower than the November high. The 3/10 yield curve, however, is around the same level as early February but 10-15bps flatter than the late October high.
  • The line’s inclusion in the XM basket and a sanguine view towards the RBA's policy outlook are also likely to influence the level of demand. RBA-dated OIS is currently pricing 35bps of easing by year-end.
  • It is also important to acknowledge that the positive sentiment towards longer-dated global bonds has started to wane.
  • Results are due at 0000 GMT/ 1100AEST.
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The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 3.75% 21 May 2034 bond, issue #TB167. The line was last sold on 2 February 2024 for A$800bn. The last sale drew an average yield of 3.9790%, at a high yield of 3.9800% and was covered 3.1125x. There were 33 bidders, 15 of which were successful and 5 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 52.6%.

  • This week's ACGB supply is consistent with the lower 2023-24 borrowing requirement outlined in the AOFM’s January’24 Issuance Program Update. The update followed the release of the MYEFO in December. A$50bn of Treasury Bond issuance is planned for 2023-24 (of which approximately $24bn was completed as of the end of 2023).
  • The bidding at today’s auction is likely to be influenced by several factors. The outright yield is around 15bps higher than the early February auction level but around 80bps lower than the November high. The 3/10 yield curve, however, is around the same level as early February but 10-15bps flatter than the late October high.
  • The line’s inclusion in the XM basket and a sanguine view towards the RBA's policy outlook are also likely to influence the level of demand. RBA-dated OIS is currently pricing 35bps of easing by year-end.
  • It is also important to acknowledge that the positive sentiment towards longer-dated global bonds has started to wane.
  • Results are due at 0000 GMT/ 1100AEST.