AUCTION PREVIEW: ACGB Nov-27 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.0bn of the 2.75% 21 November 2027 Bond, issue #TB148. The line was last sold on 19 July 2024 for A$700mn. The sale drew an average yield of 3.9797%, at a high yield of 3.9825% and was covered 4.3929x. There were 35 bidders, 9 of which were successful, and 3 were allocated in full.

• This week's ACGB supply is lower than the recent average weekly issuance level of A$1.5bn.
• 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.
• Bidding at today’s auction is likely to be influenced by several factors. The outright yield is around 50bps lower than the mid-July auction and around 100bps lower than the November 2023 high.
• However, the 3/10 yield curve is about 10bps steeper than in mid-July and close to the middle of the range it has traded in since early 2023.
• The line’s inclusion in the YM basket and improved sentiment towards global bonds should be supportive.
• On the negative side, the RBA continues to maintain a less dovish stance than the market. RBA-dated OIS indicates a cumulative 17bps of easing by year-end.
• 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.