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(U1) Holding Onto Gains

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{AU} AUSSIE BONDS AUCTION PREVIEW: The Australian Office of Financial Management (AOFM) will today sell A$1.0bn of the 1.75% 21 November 2032 Bond, issue #TB165.

  • This auction represents the first tap of the line since it was opened via syndication back in April, and it is a hard one to judge.
  • Last week's tap of ACGB Nov '31 wasn't particularly strong, with both the pricing through prevailing mids at the time of supply and cover ratio failing to register overwhelmingly strong results. This could suggest that the new assessment of the outlook for the RBA and potential tapering/adoption of a more dynamic ACGB purchase process is hampering demand at the yield levels witnessed. A reminder that a decision on the next round of RBA bond purchases will be made at the Bank's July meeting.
  • Outright yields sit towards the richer end of the range witnessed during the bond's short life, although the basic yield to maturity metric sits over 10bp above last week's lows.
  • The proximity to the futures roll likely provided further hindrance to last week's supply.
  • Swap spreads are back from the recent wides, which provides less of a relative value headwind, although they still sit comfortably above the '20 tights.
  • Results due at 0200BST/1100AEST.