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 17 July 2024 for A$500mn. The sale drew an average yield of 4.2151%, at a high yield of 4.2175%, and was covered 4.2600x. There were 34 bidders, 17 of which were successful and 10 were allocated in full. The amount allotted at the highest yield as a percentage of the bid at that yield was 10.4%.

• This week's ACGB supply is around the recent average weekly issuance range, with A$700mn of the 2.75% 21 November 2028 bond scheduled for Friday.
• According to the June 2024 Issuance Program Update, the AOFM plans to: 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 35bps lower than the level at the July auction and around 105bps lower than the November high.
• However, the 3/10 yield curve is now 5-10bps steeper than in mid-July when it was near its flattest level since last July.
• The line’s inclusion in the XM basket is positive but the RBA’s relatively hawkish stance at the August meeting may negatively impact demand. That said, the RBA-dated OIS market continues to price 21bps of easing priced by year-end.
• It is also important to acknowledge that the sentiment towards longer-dated global bonds has improved over recent months.
• Results are due at 0200 BST / 1100 AEST.