AUCTION PREVIEW: Aug-40 I/L Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$100mn of the 1.25% 21 August 2040 I/L Bond, issue #CAIN413. The line was last sold on 8 February 2022 for A$150mn. The sale drew an average yield of 0.2498%, at a high yield of 0.2550% and was covered 5.0867x. There were 50 bidders, 9 of which were successful and 7 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 81.2%.

• Note that the longer end (10+-Year) of the Australian breakeven curve remains well-anchored, hovering around the middle of the RBA’s 2-3% target band, while 5-Year BEIs sit around the 2.70% mark. Consumer based measures of inflation expectations have a clearer degree of de-anchoring, with the likes of the Melbourne Institute inflation expectations reading surging to fresh multi-year highs in Y/Y terms given the well discussed global inflation dynamic (that Australia is, at let partially, shielded from). The wider inflation pressures should facilitate smooth takedown when it comes to today’s auction.
• Results due at 0200BST/1100AEST.