AUCTION PREVIEW: ACGB Sep-26 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 0.50% 21 Sep 2026 Bond, issue #TB164. The line was last sold on 8 Jun 2022 for A$800mn. The sale drew an average yield of 3.2491%, at a high yield of 3.2550% and was covered 3.2812x. There were 42 bidders, 12 of which were successful and 6 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 26.3%.

• All in all, the recent stabilisation away from cycle cheaps in outright terms has promoted very strong showings when it comes to recent shorter dated ACGB auctions.
• The line looks a little rich on the Apr-26/Sep-26/Apr-27 butterfly. Note that the line isn’t currently lent out via the RBA’s SLF, while the two surrounding lines are lent out in relatively small size. On net, this could prevent the auction from going quite as well as it otherwise would.
• Although RBA pricing is off of the recent extremes, the language deployed by the Bank has turned more hawkish in recent weeks, which could be a marginal headwind for demand.
• The line is not included in the current YM futures basket, but that shouldn’t prove too much of a hindrance given the recent run of strong demand at auctions.
• We expect pricing to print comfortably through mids once again, with diminished ACGB liquidity factoring into that dynamic.
• Results due at 0200BST/1100AEST.