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AUCTION PREVIEW: ACGB May-34 Supply Due

AUSSIE BONDS
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Today, the Australian Office of Financial Management (AOFM) will sell A$1.0bn of the 3.75% 21 May 2034 bond, issue #TB167. The line was last sold on 2 August 2024 for A$600bn. The last sale drew an average yield of 4.0002%, at a high yield of 4.0050% and was covered 2.5333x. There were 30 bidders, 18 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 20.7%.

  • This week's ACGB supply is in line with the recent average weekly issuance range, with A$500mn of the 2.25% 21 May 2028 bond due to be issued on Friday.
  • According to the June 2024 Issuance Program Update, the AOFM plans to: conduct 2 Treasury Bond tenders most weeks; and hold 1-2 Treasury-indexed bond tenders each month. Issuance of Treasury Bonds in 2024-25 is expected to be around $90 billion. Around $2 billion will consist of Green Treasury Bond tenders.
  • The outright yield is 10-15bps lower than the early August auction level, 105bps lower than the November high, and currently near the lowest level of the past 12 months.
  • However, the 3/10 yield curve is about 10bps steeper compared to early August and close to its highest point this year.
  • The line’s inclusion in the XM basket, along with positive sentiment towards longer-dated global bonds, are likely to support demand.
  • Today's auction also takes place ahead of the August CPI release. The headline rate is expected to drop to 2.7% from 3.5%, influenced by federal electricity subsidies, but the market will focus on the trimmed mean, which was 3.8% y/y in July.
  • While there is an expectation for continued firm pricing at auctions, the above factors could constrain the overall strength of bidding.
  • Results are due at 0200 BST / 1100AEST.
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Today, the Australian Office of Financial Management (AOFM) will sell A$1.0bn of the 3.75% 21 May 2034 bond, issue #TB167. The line was last sold on 2 August 2024 for A$600bn. The last sale drew an average yield of 4.0002%, at a high yield of 4.0050% and was covered 2.5333x. There were 30 bidders, 18 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 20.7%.

  • This week's ACGB supply is in line with the recent average weekly issuance range, with A$500mn of the 2.25% 21 May 2028 bond due to be issued on Friday.
  • According to the June 2024 Issuance Program Update, the AOFM plans to: conduct 2 Treasury Bond tenders most weeks; and hold 1-2 Treasury-indexed bond tenders each month. Issuance of Treasury Bonds in 2024-25 is expected to be around $90 billion. Around $2 billion will consist of Green Treasury Bond tenders.
  • The outright yield is 10-15bps lower than the early August auction level, 105bps lower than the November high, and currently near the lowest level of the past 12 months.
  • However, the 3/10 yield curve is about 10bps steeper compared to early August and close to its highest point this year.
  • The line’s inclusion in the XM basket, along with positive sentiment towards longer-dated global bonds, are likely to support demand.
  • Today's auction also takes place ahead of the August CPI release. The headline rate is expected to drop to 2.7% from 3.5%, influenced by federal electricity subsidies, but the market will focus on the trimmed mean, which was 3.8% y/y in July.
  • While there is an expectation for continued firm pricing at auctions, the above factors could constrain the overall strength of bidding.
  • Results are due at 0200 BST / 1100AEST.