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 18 May 2022 for A$800mn. The sale drew an average yield of 3.4942%, at a high yield of 3.4975% and was covered 2.7687x. There were 41 bidders, 19 of which were successful and 12 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 4.2%.

• The recent move away from cycle cheaps, coupled with ongoing borader recession worry, the digestible DV01 on offer (A$635K) and hedgability of the line (it forms part of the XM futures basket) should generate another strong auction, even with impending event risk in view (RBNZ decision & U.S. CPI print).
• A reminder that international investors remain cautious when it comes to deploying capital in the ACGB space (partly because of the reputational damage suffered by the RBA), although that hasn’t deterred domestic bidders, with auctions continuing to pass smoothly.
• 10s operate within the middle of the recent ranges observed on the likes of the 5-/10-/15-Year butterfly and the 3-/10-Year yield spread. EFPs trade towards the wider end of the recent range.
• Results due at 0200BST/1100AEST.