AUCTION PREVIEW: ACGB Nov-32 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.2bn of the 1.75% 21 November 2032 Bond, issue #TB165. The line was last sold on 28 October 2022 for A$800mn. The sale drew an average yield of 3.7520%, at a high yield of 3.7575% and was covered 2.3813x. There were 39 bidders, 21 of which were successful and 16 were allocated in full. Amount allotted at the highest yield as a percentage of amount bid at that yield was 5.3%.

• Outright yield levels should provide smooth enough underwriting of supply, although uncertainty re: the terminal rates of the current hiking cycles seen at the world’s major central banks create some questions.
• The February cheapening move has stalled a little in recent sessions, with paper shy of cycle cheaps, this should mean outright yield levels outweigh the above negatives.
• The flatness of the curve and fact that Aussie 10s trade through their U.S. counterpart i.e. the AU/U.S. 10-Year yield spread sits in negative territory, provide some wider relative value headwinds, although these shouldn’t derail the auction, especially with the line looking relatively attractive in a micro-RV sense as it moves further away from benchmark 10-Year status.
• Results due at 0000GMT/1100 AEDT.