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 Indexed Bond, issue #CAIN413. The line was last sold on 9 August 2022 for A$100mn. The sale drew an average yield of 1.2380%, at a high yield of 1.2500% and was covered 3.7000x. There were 38 bidders, 3 of which were successful, and 3 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 100.0%.

• Breakevens are comfortably back from the cycle highs witnessed earlier this year, but have rebounded from the recent lows, with RBA terminal rate pricing comfortably off of cycle highs, wage levels operating away from wage/inflation spiral levels and continued inflationary pressure evident.
• Still, the level of inflation in Australia is expected to move higher into year end, which, when coupled with the potential for some worry re: the deeper embedding of inflation and the current level of breakevens, is set to provide the grounds for solid takedown at today’s auction.
• Results are due at 0100BST/1100AEDT.