MNI: The Australian Office of Financial Management...>

MNI: The Australian Office of Financial Management (AOFM) will sell $A600mln of

2.75% 21 November 2028 bonds today, issue #TB152.

- The line was last sold on Feb 7 for $A600mln, the sale drew an average yield

of 2.8862%, and was covered 5.4267x. The issue has A$21.8bln outstanding with a

modified duration of 9.17 years and is part of the underlying basket for the

10-Year future (XMH8).

- The AU/US 10-Year spread has mainly operated between 0 & 10bp over the last 2

weeks, moving in to negative territory at times as the Fed hiking cycle & US

deficit worries have removed the premium that Australian 10-Year paper offered.

The domestic 3-10 Year curve has operated between 70 & 80bp for the majority of

February, notably higher than December's circa 45bp low.

- In a recent note HSBC suggested that "the belly of the Australian sovereign

bond curve looks cheap on a range of barbells and on asset-swap". As a result,

they recommended buying nearby ACGB 04/27 against 3 & 15-Year wings.