AUCTION‌ ‌PREVIEW:‌ ACGB Nov '27 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 2.75% 21 November 2027 Bond, issue #TB148. The line was last sold on 20 April 2018 for A$400mn. The sale drew an average yield of 2.7989%, at a high yield of 2.8000% and was covered 5.9475x. There were 39 bidders, 12 of which were successful and 5 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 76.5%.

• This line has not been tapped since '18 and the decision to do so may have come on the back of dealer liaison from the AOFM, which would likely result in at least a baseline level of adequate demand.
• This, coupled with the excess liquidity evident in the domestic banking system and comparative appeal of ACGBs on an international basis will likely result in another smooth round of supply.
• The belly of the curve has benefitted from speculation surrounding the potential for the RBA to renege on its earlier tapering announcement owing to the COVID situation in Australia (some have even touted an upsizing of the RBA's weekly bond buying in the coming months). This has allowed the line to register multi-month lows in yield terms in recent sessions. However, the previously outlined factors should facilitate a smooth auction.
• Results due at 0200BST/1100AEST.