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 Aug 2040 I/L Bond, issue #CAIN413. The line was last sold on 12 Apr 2022 for A$100mn. The sale drew an average yield of 0.8269%, at a high yield of 0.8400% and was covered 3.6000x. There were 39 bidders, 21 of which were successful, and 18 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 40.0%.

• 20-Year breakevens have remained comfortably within the RBA’s target band after failing to make a lasting break above the 2.50%. This suggests that the market has some faith in the Bank’s ability to bring inflation back to target over the medium- to long-term, even with notable overshoots expected to continue over a shorter horizon.
• 20-Year BEIs last print at ~2.25% after edging away from the YtD trough registered in July.
• Expect the current inflationary backdrop to promote a baseline level of demand when it comes to today’s auction, which should ultimately pass smoothly.
• Results are due at 0200BST/1100AEST.