AUCTION PREVIEW: ACGB Nov '31 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.0bn of the 1.00% 21 November 2031 Bond, issue #TB163. The line was last sold on 5 May 2021 for A$1.2bn. The sale drew an average yield of 1.7453%, at a high yield of 1.7475% and was covered 3.3542x. There were 42 bidders, 15 of which were successful and 8 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 35.3%.

• Recent tender history for the line has been mixed, with some cases of strong demand and some a little more mediocre (although still comfortably covered).
• More broadly, recent AOFM auctions have seen mixed cover ratios, although weighted average yields have continued to print comfortably through mids. Still, the RBA-adjusted net negative issuance continues to support the space, with the recent outright richening pointing to the potential for solid demand. Note that the 5-/10-/15-Year butterfly has also richened, while swap spreads have widened.
• The recent richening may dissuade some, with the line now trading at the richest outright levels seen since Feb. The futures roll also provides a potential incremental negative for demand, although the line forms part of both the XMM1 & XMU1 baskets and this auction represents the only round of ACGB coupon supply this week.
• Results due at 0200BST/1100AEST.