AUCTION PREVIEW: ACGB Nov-28 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 2.75% 21 November 2028. The line was last sold on 2 November 2022 for A$800mn. The sale drew an average yield of 3.4932%, at a high yield of 3.500% and was covered 3.1312x. There were 43 bidders, 25 of which were successful and 19 were allocated in full.

• Due to the most recent auction for the Nov-28 line occurring in November 2022, the previous result lacks relevance for comparison.
• However, on July 12, 2023, the May-28 bond was offered for A$700 million. This offering exhibited firm pricing, as evidenced by the weighted average yield printing 1.43bp through prevailing mids. Nevertheless, the cover ratio stood at 3.6071x, notably weaker than the 5.700x achieved at its auction on February 10.
• In early July, uncertainty over the near-term RBA policy outlook and the flatness of the 3/5 cash curve appeared to dampen overall demand. Yet, the significant cheapening of the line in the lead-up to the auction did provide a mitigating factor for these concerns.
• As far as today’s auction is concerned, the Nov-28 bond's outright yield sits approximately 30bp lower than its early July peak. Despite this, it remains comfortably situated near the upper bound of the range within which it has traded since September. This should make it an appealing option for potential buyers.
• A more sanguine view regarding the RBA policy outlook, coupled with a 10bp steepening of the 3/5 curve over the past month should also bolster demand.
• Overall, another round of well-received supply is expected.
• Results are due at 0200 BST / 1100 AEST.