AUCTION PREVIEW: ACGB Nov '31 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 1.00% 21 November 2031 Bond, issue #TB163. The line was last sold on 9 June 2021 for A$1.0bn. The sale drew an average yield of 1.5713%, at a high yield of 1.5725% and was covered 2.6700x. There were 44 bidders, of which 17 were successful and 6 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 73.1%.

• The potential for the RBA to move off of its earlier tapering decision (which wasn't set to go into play until mid-September) on the back of the domestic COVID lockdowns has supported the broader space in recent weeks (alongside a richening in U.S. Tsys), with the line currently yielding ~1.20%, nearly 30bp richer than prevailing yields from the previous auction.
• Further out, AOFM issuance dynamics will be eyed, given the lockdowns evident across large parts of Australia at present, resulting in growing calls for JobKeeper-like schemes to be reinstated.
• The 3-/10-Year ACGB yield spread has flattened back towards levels not witnessed since the early part of '21, which may present some (modest) relative valuation headwinds. 10s have also richened on the 5-/10-/15-Year butterfly.
• Still, the RBA QE dynamic, abundant liquidity in the domestic banking system and international appeal of the space should result in smooth passage of the auction, although the line hasn't seen particularly strong demand in relative terms in recent auctions.
• Results due at 0200BST/1100AEST.