AUCTION PREVIEW: ACGB Nov-28 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 2.75% 21 November 2028. The line was last sold on 30 August 2023 for A$700mn. The sale drew an average yield of 3.8331%, at a high yield of 3.8350% and was covered 3.2529x. There were 42 bidders, 14 of which were successful and 8 were allocated in full.

• Given that the most recent auction for the Nov-28 line took place in August 2023, comparing it with the previous result may lack relevance.
• However, on 15 November 2023, the May-28 bond was offered for A$800 million, showing strong demand metrics with a cover ratio of 3.8750x.
• In light of yesterday’s RBA statement, which was less dovish than expected, it's worth noting that the mid-November auction of the May-28 bond also faced uncertainty regarding the policy outlook. This uncertainty followed the RBA's decision to hike the cash rate to 4.35% a week prior.
• Regarding today’s auction, the Nov-28 bond's outright yield is approximately 85bps lower than its early November peak, nearing the lower bound of the range it has traded within since June. This may diminish its appeal to potential buyers.
• The flatness of the 3/5 cash curve seemed to have little impact on overall demand at November’s May-28 auction, which is relevant considering the current state of the curve.
• Overall, another round of well-received supply is expected.
• Results are due today at 0000 GMT / 1100 AEST.