AUCTION PREVIEW: ACGB Nov-32 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 1.75% 21 Nov 2032 Bond, issue #TB165. The line was last sold on 13 Jul 2022 for A$800mn. The sale drew an average yield of 3.4150%, at a high yield of 3.4175% and was covered 2.5250x. There were 43 bidders, 20 of which were successful, and 12 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 49.9%.

• The recent move away from cycle cheaps for the global core FI space and yesterday’s RBA decision (which has opened the way for more considered tightening going forwards) should prove to be supportive when it comes to today’s auction.
• In micro-RV terms the benchmark 10-Year status of the nearby ACGB May-32 makes the line look optically cheap, although not as cheap as ACGB May-33.
• A reminder that last week’s ACGB Nov-33 supply went well, although that is a less tendered line, with a smaller amount on issue (it was the first tap of the line since the initial syndication earlier this year), so it may not be wise to compare the auctions on a like-for-like basis. This is further compounded by the relative softness (or lack of outright strength) that can be observed in terms of the recent pricing of ACGB Nov-32 auctions.
• The flatness of the local 3-/10-Year yield curve is another headwind for the auction, although this shouldn’t prove to be a major hurdle.
• The recent historical trend of ACGB auctions and this week’s more palatable DV01 offering from the AOFM bode well for the auction. These matters, coupled with the fact that the line is part of the XM futures basket, which boosts its hedgability, should promote the smooth passage of the auction.
• Results are due at 0200BST/1100AEST.