AUCTION PREVIEW: ACGB Nov-32 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 1.75% 21 November 2032 Bond, issue #TB165. The line was last sold on 9 March 2022 for A$1.0bn. The sale drew an average yield of 2.3370%, at a high yield of 2.3400% and was covered 2.1450x. There were 50 bidders, 28 of which were successful and 18 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 27.6%.

• A fairly generic round of 10-Year ACGB supply should come and go without too much fuss.
• The modest re-steepening of the domestic 3-/10-Year curve from cycle flats and lack of follow through re: the outright cycle cheaps registered earlier this month should result in smooth enough digestion of supply.
• The markdown in the amount on offer should result in firmer headline optics, although this of course needs to be adjusted for.
• Still, ACGB auction cover ratios have normalised in recent months, on the back of the removal of the RBA’s bond buying schemes, while market volatility has limited international interest in ACGBs.
• The 10-Year spread to U.S. Tsys (~50bp for the respective benchmarks) may result in some cross-market demand, although we once again flag wider market volatility as potential limiting factor on this front.
• XM basket status is another incremental positive, with the hedgability a net positive for demand.
• Results due at 0200BST/1100AEST.