AUCTION PREVIEW: Aug-40 Index Linked Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$150mn of the 1.25% 21 August 2040 I/L Bond, issue #CAIN413. The line was last sold on 25 May 2021 for A$150mn. The sale drew an average yield of 0.1663%, at a high yield of 0.1700% and was covered 5.5333x. There were 47 bidders, 12 of which were successful and 7 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 50.0%.

• Australian longer dated breakeven metrics (10s and 20s) are back from their respective ’21 highs after never really looking to force their way sustainably into the top half of the RBA’s 2.0-3.0% target band. Still, they operate comfortably above 2.0%. RBA Governor Lowe has noted that Australia’s inflation story is different to the one that has been observed globally. If that makes domestic price pressures stickier in the medium to long term, this could underpin demand for index linked supply over a longer horizon, especially with the RBA seemingly willing to run the economy hot to generate sustained underlying inflationary pressure.
• Results due at 0000GMT/1100AEDT.