AUCTION PREVIEW: Nov '31 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1.2bn of the 1.00% 21 November 2031 Bond, issue #TB163. The line was last sold on 31 March 2021 for A$2.0bn. The sale drew an average yield of 1.8381%, at a high yield of 1.8400% and was covered 2.4675x. There were 43 bidders, 23 of which were successful and 14 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 85.3%.

• This week sees the AOFM revert to a more vanilla issuance slate, with negative RBA-adjusted net supply and record levels of excess liquidity in the domestic banking system still set to underpin demand for ACGBs.
• It is hard to gauge demand vs. last week's ACGB Jun '31 auction, given last week's month end support, smaller DV01 and more limited weekly supply evident last week.
• The tweaks in language deployed alongside yesterday's RBA decision provide some incremental headwinds to this auction, but that shouldn't present major hurdles for demand. We should also remind readers that next week will bring about the release of the Federal Budget, with the government experiencing a more favourable fiscal situation vs. its own expectations, although recent rhetoric from the Treasurer pointed to the need to balance support and fiscal repair, with perhaps some more focus on the former in the immediate term. Still, the weekly run rate of AOFM issuance may be adjusted lower post-budget.
• 10s have richened vs. swaps in recent weeks, although 10-Year swap spreads still sit ~5bp or so off of recent wides.
• Results due at 0200BST/1100AEST.