AUCTION PREVIEW: ACGB Nov-29 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 2.75% 21 November 2029 bond. The line was last sold on 24 February 2023 for A$600mn. The sale drew an average yield of 3.7610%, at a high yield of 3.7625% and was covered 3.2916x. There were 40 bidders, 12 of which were successful and 5 were allocated in full.

• Considering that the most recent auction for the Nov-29 line occurred in February 2023, comparing it with the previous result may lack relevance.
• However, on February 7th and 14th, 2023, the Nov-28 and Dec-30 bonds were respectively offered for A$800 million each. The results of the two auctions revealed varying demand metrics, with the former showing a cover ratio of 3.3687x and the latter 2.7125x.
• While the outright level of the line comfortably sits within the range it has traded in this year, it still falls short of being included in the YM basket, placing it in the less favoured zone of the yield curve.
• The richness of the belly vs. 2s and 10s may also present a hurdle for demand, given that it is just above cycle extremes.
• Ultimately, it is expected that recent firm pricing at auctions will continue, although the issues mentioned above may limit the overall strength of bidding.
• Results are due at 0000 GMT/1100 AEDT.