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 26 July 2021 for A$800mn. The sale drew an average yield of 1.1879%, at a high yield of 1.1900% and was covered 6.0750x. There were 52 bidders, 20 of which were successful and 9 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 18.6%.

• 10s have ticked away from multi-month richest levels in recent sessions, although the outright yield level should not put the auction in any jeopardy in demand terms.
• The record levels of excess liquidity evident in the domestic banking system, international relative value appeal and RBA purchase-adjusted negative net supply dynamic will continue to support AOFM ACGB auctions in the near-term.
• Hedgeability of the line (XMU1 & XMZ1 basket status, as well as being the benchmark 10-Year ACGB) will likely aid takedown further.
• The uptick from multi-month flats in terms of the 3-/10-Year yield spread may provide an incremental positive, although that curve still sits ~90bp off of the YtD steeps.
• 10-Year swap spreads have moved to YtD wides.
• The proximity to today's Q2 GDP print may provide an incremental negative in terms of demand, although most of the sell-side notes that we have seen point to a downside risk for the headline GDP print.
• Results due at 0200BST/1100AEST.