AUCTION PREVIEW: ACGB Nov-32 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.0bn of the 1.75% 21 November 2032 Bond, issue #TB165. The line was last sold on 29 October 2021 for A$1.0bn. The sale drew an average yield of 1.9302%, at a high yield of 1.9400% and was covered 4.0950x. There were 65 bidders, 34 of which were successful and 28 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 45.1%.

• The broader ACGB space has stabilised in the time that has passed since the previous tap of the line, which came at a time when it became apparent that the RBA was abandoning its YCT mechanism. An uptick in semi-issuance, alongside an increased AOFM issuance slate, may weigh a little on the cover ratio, but pricing should still be on the firm side. The well-documented trifecta of supportive measures i.e. excess liquidity in the domestic banking system, international appeal and negative RBA purchase-adjusted net supply should result in yet another smooth auction.
• The line's outright yield has moved back up towards 2.0% in recent days, although operates ~20bp off the recent cheaps.
• Bonds continue to outperform swapw, with the recent widening in swap spreads unlikely to deter bidders.
• 10s have moved away from recent richest levels on the 5-/10-/15-Year butterfly (granted this line is a little longer than 10s), although the richening on that structure hadn't provided anything in the way of notable headwinds when it came to the supply of XM basket bonds.
  
• Results due at 0000GMT/1100AEDT.