AUCTION PREVIEW: ACGB May-41 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 3.75% 21 May 2034 Bond

• This is the first tap of the bond since its initial syndication back in November ’22.
• Micro RV metrics look attractive and should detract from any worry surrounding the need for increased supply to bring the bond up to the required size.
• Part of the “cheapness,” at least that vs. slightly shorter maturities, is the fact that this is the first bond beyond inclusion in the XM futures basket, which makes it slightly less hedgible than the bonds that underly that contract. This is a marginal headwind for supply.
• The impending deluge of major global central bank decisions may provide a minor headwind for takedown.
• Also note that Aussie 10s have moved back from recent richest levels vs. U.S. 10s and now offer a modest yield pickup vs. their counterparts on the Tsy curve. This pickup is only a couple of bp (and comes after firmer than expected Aussie Q4 CPI data), but that should be an incremental positive.
• Results due at 0000GMT/1100AEDT.