AUCTION PREVIEW: Nov '31 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.0bn of the 1.00% 21 Nov 2031 Bond, issue #TB163. The line was last sold on 2 December 2020 for A$2.0bn. The sale drew an average yield of 1.0618%, at a high yield of 1.0650% and was covered 2.6950x. There were 51 bidders, 29 of which were successful and 19 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 10.9%.

• The ongoing offshore demand, particularly from Japan, should support takedown, in addition to the ongoing RBA purchase-adjusted net issuance dynamic for ACGBs and the ever-swelling surplus of E/S surplus balances lodged at the RBA looking for a home.
• The digestible DV01 on offer should offset at least some of the worry surrounding the recent vol/cheapening, even with the AOFM's atypical (by recent standards) weekly issuance slate.
• Hedgability with the 10-Year future should also aid demand.
• The recent richening vs. swaps may dissuade some, although that is largely fuelled by the RBA QE dynamic, and may persist.
• Results due at 0000GMT/1100AEDT.