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 23 Mar 2022 for A$1.0bn. The sale drew an average yield of 2.7542%, at a high yield of 2.7575% and was covered 2.6700x. There were 35 bidders, 14 of which were successful, and 9 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 17.1%.

• The recent stabilisation away from cycle cheaps is a positive, although continued uncertainty surrounding the RBA after the widespread criticism of its communique during the unwind of its COVID crisis policy settings keeps many prospective offshore investors on the sidelines when it comes to ACGBs.
• There isn’t much in the way of relative value against 3s with the curve sitting so flat, while the 10-Year zone also operates towards the richer end of the YtD range on the 5-/10-/15-Year butterfly.
• In terms of micro-RV, the line is rich vs. surrounding bonds (it is the shortest bond in the XMU2 & XMZ2 baskets). Note that the basket status of the line also promotes headgability, which is an incremental positive for the auction.
• All in, we expect the recent stabilsation away from cycle cheaps to promote another round of solid demand when it comes to the ACGB auction, although some of the above factors may limit the cover ratio from being as strong as it otherwise would be.
• Results are due at 0200BST/1100AEST.