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 12 January 2021 for A$1.0bn. The sale drew an average yield of 1.8898%, at a high yield of 1.8925% and was covered 3.6550x. There were 48 bidders, 26 of which were successful and 15 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 4.9%.

• We expect the impending cessation of the RBA’s QE purchases (the final round of scheduled ACGB purchases will take place tomorrow) will limit the cover ratio (as has been seen in the last couple of ACGB auctions), although more than ample liquidity levels in the domestic banking system will likely result in the smooth digestion of supply and healthy pricing metrics.
• The cheapening witnessed in recent sessions will lure some off the sidelines, although some will be wary of continued cheapening. The line’s outright yield now sits at the highest levels in its short relatively short life.
• 10s continue to operate nearer the richer end of the 1-Year range on the 5-/10-/15-Year butterfly.
• Results due at 0000GMT/1100AEDT.