AUCTION‌ ‌PREVIEW:‌ Large DV01 Expected To Be Absorbed Smoothly

The Australian Office of Financial Management (AOFM) will today sell A$2.5bn of the 1.25% 21 May 2032 Bond, issue #TB158. The line was last sold on 17 June 2020 for A$2.0bn. The sale drew an average yield of 1.0098%, at a high yield of 1.0125% and was covered 2.7200x. There were 35 bidders, 20 of which were successful and 12 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 58.4%

• The AOFM is moving to its new normal in terms of weekly issuance, easing back from the levels that we become accustomed to earlier this year. The auction itself is relatively large in DV01 terms, a shade over A$2.8mn.
• The downtick in weekly issuance should offset this and facilitate a continuation of the recent run of solid to strong tenders. Swap spreads have moved off of extreme richest levels, aided by the issuance dynamic, although remain at historically suppressed levels.
• The inclusion of the line in the XMZ0 basket also promotes hedgability of the supply, which should further aid a smooth takedown.
• Results due at 0100BST/1100AEDT.