AUCTION PREVIEW: ACGB Nov-33 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 3.00% 21 November 2033 Bond, issue #TB166. The line was last sold on 29 Jul 2022 for A$1.0bn. The sale drew an average yield of 3.0913%, at a high yield of 3.0950% and was covered 2.2450x. There were 47 bidders, 21 of which were successful, and 15 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 86.5%.

• This is the second tap of the bond since its initial syndication on 12 April 2022, with the AOFM building liquidity in the line in recent weeks.
• The recent stabilsation away from cycle cheaps for core global FI markets will help digestion of the auction, although the impending event risk i.e. the Jackson Hole symposium, may keep some sidelined. Meanwhile, international investors remain hesitant when it comes to deploying capital in ACGBs given the ongoing market vol. and uncertainty re: the degree of tightening that the RBA will ultimately deliver during the current hiking cycle.
• The flatness of the ACGB curve will also act as a deterrent for some.
• The line looks relatively fairly valued in a micro- RV sense, with some of the usual kinks surrounding the basket status of nearby bonds evident (ACGB Nov-33 does not form part of the XMU2 basket, but rolls into the XMZ2 basket, as the longest maturity bond underpinning that contract).
• Ultimately, the auction should go smoothly enough, with pricing comfortably through mids, as has been the trend in ACGB supply for some time. The cover ratio is the key variable, with the above factors and the relative newness of the line all in the mix there.
• Results are due at 0200BST/1100AEST.