AUCTION PREVIEW: ACGB Nov-33 Supply Due

The Australian Office of Financial Management (AOFM) will today sell $900mn of the 3.00% 21 November 2033 Bond, issue #TB166. The line was last sold on 16 November 2022 for A$900mn. The sale drew an average yield of 3.7327%, at a high yield of 3.7350% and was covered 2.1222x. There were 42 bidders, 22 of which were successful and 13 were allocated in full. Amount allotted at the highest yield as percentage of amount bid at that yield was 27.2%.

• Outright yields have stabilised away from cycle cheaps in recent weeks, which is a positive for demand and should support takedown.
• Furthermore, the presence of the line in the underlying baskets for both the XMZ2 and XMH3 contracts means that it is easily hedgible, which should support takedown at the margin.
• The relative newness of the bond means that it will keep being built up to benchmark size, with only A$18.5bn outstanding at present.
• Flatness of the curve (in a domestic sense) may limit wider appeal.
• Also, desks don’t seem too enticed by this bond, prefer surrounding lines when it comes to micro-RV plays, meaning that the bond has cheapened on micro-flies.
• The auction should pass smoothly enough, although the aforementioned headwinds and lack of favour among desks may limit overall takedown.
• Results due at 0000GMT/1100AEDT.