AUCTION PREVIEW: ACGB Nov-33 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$500mn of the 3.00% 21 November 2033 Bond, issue #TB166. The line was last sold on 17 April 2024 for A$800mn. The sale drew an average yield of 4.355%, at a high yield of 4.3575%, and was covered 2.6562x. There were 35 bidders, 15 of which were successful and 9 were allocated in full. The amount allotted at the highest yield as a percentage of the bid at that yield was 88.9%.

• This week's ACGB supply is around the recent average weekly issuance range, with A$300mn of the 1.75% 21 June 2051 bond issued on Monday and A$700mn of the 2.75% 21 November 2027 bond scheduled for Friday.
• According to the June 2024 Issuance Program Update, the AOFM plans to: issue a new December 2035 Treasury Bond by 30 September 2024 (by syndication and subject to market conditions); conduct 2 Treasury Bond tenders most weeks; and hold 1-2 Treasury Indexed Bond tenders each month. Issuance of Treasury Bonds in 2024-25 is expected to be around $90 billion. Around $2 billion will consist of Green Treasury Bond tenders.
• The bidding at today’s auction is likely to be influenced by several factors. The outright yield is 15bps lower than the level at the April auction and around 75bps lower than the November high.
• The 3/10 yield curve is around 15bps flatter than in mid-April and close to its flattest level since July last year.
• The line’s inclusion in the XM basket is positive but the RBA’s relatively hawkish stance at the June meeting and May’s higher-than-expected CPI may negatively impact demand. That said, the RBA-dated OIS market has significantly reduced the chances of another 25bp hike over the past few weeks.
• It is also important to acknowledge that the sentiment towards longer-dated global bonds has improved over recent months, following a run of benign US inflation data.
• Results are due at 0200 BST / 1100 AEST.