AUCTION PREVIEW: ACGB Sep-26 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$600mn of the 0.50% 21 September 2026 Bond, issue #TB164. The line was last sold on 19 September 2022 for A$700mn. The sale drew an average yield of 3.4555%, at a high yield of 3.4600% and was covered 3.2100x. There were 38 bidders, 15 of which were successful and 10 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 27.2%.

• The recent stabilisation and subsequent move away from cycle cheaps will be a positive for demand.
• The line looks a little cheap vs. the ACGBS maturing in ’25, although that is a product of benchmark 3-Year status (past & present) and probably an element of lingering impact from the RBA’s bond purchase scheme.
• Modest borrowing of the line via the RBA’s SLF (A$96mn at the last count) indicates some underlying demand for access to the line.
• Presence of the line in the underlying baskets for both YMZ2 & YMH3 mean that the contract is easily hedgible, which is a positive for demand.
• All in, we expect another round of smooth auction digestion.
• Results due at 0000GMT/1100AEDT.