AUCTION PREVIEW: ACGB Sep-26 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$700mn of the 0.50% 21 September 2026 Bond, issue #TB164. The line was last sold on 22 Jul 2022 for A$700mn. The sale drew an average yield of 3.2120%, at a high yield of 3.2150% and was covered 3.4029x. There were 48 bidders, 19 of which were successful, and 11 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 42.8%.

• The bond forms part of the YMZ2 futures basket, but is not in the U2 contract’s underlying basket, with liquidity being built in the line ahead of the Z2 contract becoming the lead.
• The line looks a little rich in micro-RV terms, although we would expect that the recent stabilsation off of cycle cheaps will be enough to generate demand when it comes to today’s auction, with firm pricing expected. The cover ratio may be a little on the softer side owing to the lack of international participation evident at present (which most are linking to uncertainty surrounding the RBA), in addition to the uptick in the DV01 on offer from the AOFM this week.
• Results are due at 0200BST/1100AEST.