AUCTION PREVIEW: ACGB May-41 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$300mn of the 2.75% 21 May 2041 Bond, issue #TB156. The line was last sold on 7 February 2022 for A$500mn. The sale drew an average yield of 2.4864%, at a high yield of 2.4900% and was covered 2.1440x. There were 69 bidders, 35 of which were successful and 25 were allocated in full. Amount allotted at the highest yield as a percentage of amount bid at that yield was 23.4%.

• The AOFM opens calendar ’23 issuance with one of its longer bonds (although the ~A$350K of DV01 on offer isn’t burdensome), with the initial weekly issuance rate of A$1.5bn at the upper end of the required run rate to meet the downwardly adjusted issuance task for the current FY (excluding syndications).
• A lack of pickup on a cross-market basis, last week’s firmer than expected CPI data, the Monday timing issue and the fact that the bond is part of the “unloved” zone of the curve may leave some of the metrics looking a little weak.
• Still, the back up in yields after the early richening observed in ’23, leaving the line yielding just under 4.00% into auction, should result in smooth enough digestion.
• Results due at 0000GMT/1100AEDT.