AUCTION PREVIEW: ACGB Nov-33 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 3.00% 21 November 2033 Bond, issue #TB166. The line was last sold on 5 July 2023 for A$700mn. The sale drew an average yield of 3.9913%, at a high yield of 3.995% and was covered 4.7071x. There were 46 bidders, 11 of which were successful and 8 were allocated in full. Amount allotted at the highest yield as a percentage of amount bid at that yield was 1.0%.

• This week's ACGB supply continues the run of relatively low issuance, consistent with the lower 2023-24 borrowing requirement outlined in the AOFM’s June’23 Issuance Program Update. Updated guidance on the 2023-24 issuance program will be provided following the MYEFO.
• Given that the present outright yield is notably above the level seen during the early July auction and is positioned close to the upper range it has maintained since June 2022, there is an anticipation of sustained strong pricing during today's auction. Additionally, the approximately 40bp steepening of the 3/10 cash curve since late June is likely to bolster demand.
• A less hawkish RBA combined with the line’s inclusion in the XM basket, which enhances hedging opportunities, should also work to keep demand solid today.
• However, it is important to acknowledge that sentiment towards longer-dated global bonds has turned pessimistic over the past month.
• Results are due at 0000 BST / 1100 AEST.