AUCTION PREVIEW: Plenty Of Positives, But Reason For Caution Too

The Australian Office of Financial Management (AOFM) will today sell A$2.0bn of the 2.50% 21 May 2030 Bond, issue #TB155. The line was last sold on 7 August 2020 for A$2.0bn. The sale drew an average yield of 0.8759%, at a high yield of 0.8775% and was covered 3.6500x. There were 41 bidders, 18 of which were successful and 8 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 40.8%.

• This auction will see participants assess outright valuation with offshore names, particularly those in Japan, still benefitting from attractive FX hedged yields. Offshore investors will likely show their interest, especially if last week's ACGB Nov '31 syndication is anything to go by.
• The steeper curve also adds to this story.
• Month-end demand may also support the bid.
• Still, the Fed's recent AIT communique and subsequent cheapening in the space may see some take a more cautious approach and look for entry at better levels.
• Results due at 0200BST/1100AEST.