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 24 November 2021 for A$1.0bn. The sale drew an average yield of 1.9690%, at a high yield of 1.9700% and was covered 3.3900x. There were 45 bidders, 17 of which were successful and 7 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 89%.

• Calendar ’22 AOFM issuance gets underway with a generic 10-Year basket bond offering. The recent cheapening provides a more attractive outright entry point vs. what was witnessed in December, but current yields are still below previous auction levels.
• Negative RBA-purchase adjusted net supply dynamics should continue to facilitate the smooth digestion of auctions in the upcoming weeks (although this dynamic may change come the end of the RBA’s February meeting, which could result in a more tentative bidding pattern in AOFM auctions leading up to that event).
• While the 3-/10-Year yield curve has moved away from the recent lows, it still remains flat when compared to the levels witnessed through most of ’21. This may limit the scope for broader demand.
• Recent weeks have seen 10s cheapen a little on the 5-/10-/15-Year butterfly, although current entry levels of that structure are by no means attractive in a historical sense.
• 10-Year swap spreads have narrowed from ’21 wides, with the ACGB market set to receive less RBA support as we move through ‘22.
• Results due at 0000GMT/1100AEDT.