AUCTION PREVIEW: The AOFM Re-Opens The Taps

The Australian Office of Financial Management (AOFM) will today sell A$1.8bn of the 1.50% 21 June 2031 Bond, issue #TB157. The line was last sold on 30 Oct 2020 for A$2.0bn. The sale drew an average yield of 0.8498%, at a high yield of 0.8525% and was covered 4.7175x. There were 54 bidders, 28 of which were successful and 17 were allocated in full. Amount allotted at highest yield as percentage of amount bid at that yield was 10.6%.

• The lack of an imminent ACGB Nov '32 syndication, lower weekly AOFM issuance rate and negative net RBA purchase adjusted supply backdrop (in a typical week) that will be in play over the coming months are supportive factors for the upcoming auction. Add to this the swelling E/S surplus balances looking for a home and the fact that this is the first round of ACGB issuance since early December.
• The cheapening seen over the last 6 weeks or so also promotes a more attractive outright entry point, as does the curve steepening over that time, although the fiscal backdrop in the U.S. may result in at least a degree of caution
• 10s have also cheapened to the most attractive level seen on the 5-/10-/15-Year butterfly in recent months. The 3-/10-Year curve hit the steepest levels seen since 2015 in recent weeks but has moved away from steepest levels in recent sessions.
• Results due at 0000GMT/1100AEDT.