AUCTION PREVIEW: ACGB Nov-29 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$600mn of the 2.75% 21 November 2029 Bond, issue #TB154. The line was last sold on 18 November 2022 for A$700mn. The sale drew an average yield of 3.5318%, at a high yield of 3.5350% and was covered 4.3114x. There were 38 bidders, 17 of which were successful and 11 were allocated in full. Amount allotted at the highest yield as a percentage of amount bid at that yield was 14.9%.

• It will be a case of assessing the attractiveness of elevated (within the recent range) outright yield levels and an attractive carry and roll proposition on a micro-RV basis against the chances of a sharp round of cheapening surrounding higher for longer interest rates at the major global central banks (although the softer than expected Q4 WPI data may encourage some more aggressive bidding than would otherwise have been the case).
• The 2-/5-/10-Year fly trades in the middle of the recent range, suggesting there isn’t much in the way of broader RV concerns heading into auction, at least none that should provide meaningful derailment.
• All in, the auction should pass smoothly enough, with the assessment of the above mix of matters set to drive the overall tone of the supply.
• Results due at 0000GMT/1100 AEDT.