AUCTION PREVIEW: Dec '30 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.2bn of the 1.00% 21 December 2030 Bond, issue TB#160. The line was last sold on 17 February 2021 for A$1.5bn. The sale drew an average yield of 1.3713%, at a high yield of 1.3750% and was covered 3.9567x. There were 48 bidders, 27 of which were successful and 18 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 12.9%.

• The ACGB space has calmed, with several focal points in play: a better than expected fiscal position in Australia (which may result in the delay of the syndication of ACGB Nov '32), attractive yields for Japanese investors (in both FX-hedged and -unhedged terms) and the negative RBA-adjusted net supply dynamic (supplemented by record amounts of excess liquidity in the banking system, as proxied by surplus E/S balances lodged at the RBA).
• The net impact of the above has tended to result in well received ACGB auctions in recent months, and that should continue to be the case in the immediate term, with that dynamic also aided by the pullback from recent wides in swap spreads (with the net impact of the above matters set to support bonds vs. swap in the immediate term). Market pricing suggesting the RBA will have to move ahead of the timeline outlined in its forward guidance and the global reflation trade narrative present well documented risks to longs.
• Results due at 0200BST/1100AEST.