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 29 July 2024 for A$900mn. The sale drew an average yield of 3.9319%, at a high yield of 3.9350% and was covered 4.4389x. There were 40 bidders, 19 of which were successful and 9 were allocated in full.

• This week's ACGB supply is consistent with the recent average weekly issuance when Wednesday’s sale of A$800mn of 3.00% 21 November 2033 bond is included.
• 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.
• The previous offering of the Nov-28 line saw the weighted average yield print 0.3bp through prevailing mids, with the cover ratio jumping sharply to 4.4389x.
• For today’s auction, the Nov-28 bond's outright yield is at the bottom of its 12-month trading range, 35-40bps lower than at the July auction and around 100bps lower than its early November peak.
• The 3/5 cash curve is near the middle of its 12-month range and slightly steeper than in late July.
• Bidding at today’s auction is also likely to be influenced by other factors. First, the Nov-28 is included in the YM basket. Secondly, the RBA continues to push back against market expectations for easing by year-end, which currently sit at 21bps.
• Overall, another round of well-received supply is expected, but possibly with a less aggressive bid.
• Results are due today at 0200 BST / 1100 AEST.