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 29 September 2021 for A$1.0bn. The sale drew an average yield of 1.4956%, at a high yield of 1.4975% and was covered 5.3400x. There were 45 bidders, 19 of which were successful and 8 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 21.6%.

• The fallout from yesterday's RBA decision & post-meeting webinar from Governor Lowe (which we have covered extensively elsewhere), coupled with the fact that the front end has been subjected to more volatility than the long end of the curve in recent dealing, should facilitate a smooth takedown.
• The well discussed triumvirate of record excess liquidity levels, negative RBA purchase-adjusted net supply dynamics and international relative value appeal are set to remain the underlying drivers in the background.
• Hedgability via the XM futures contract will also support takedown.
• Note that the yield on the line runs ~25bp richer than levels witnessed at the backend of last week (which represented all-time cheaps), but there is still a notable pickup in yield terms vs. what was seen a few short months ago.
• Relative value appeal is a little more limited, with the 5-/10-/15-Year butterfly touching the narrowest level seen since Apr '20 last week, although there has been a bit of a bounce since.
• Results due at 0200BST/1100AEST.