NAB: ACGB Nov ‘32 To Drive Sizeable Index Extension

NAB note that "ACGB Nov '32 will enter the Bloomberg AusBond indices at the end-April rebalancing. The maturing ACGB May '21 will be removed from the index at the same time. Indeed this could partly justify the timing of the new issue, to capture 'structural demand' from the extension. There's a total of nearly A$30bn of maturing stock that will be removed in the rebalancing, and these maturities as well as issuance conducted in the month to date imply that the AusBond 0Y+ composite will extend by about 0.17. This is more than double the average month-end extension and could grow further depending on issuance over the next fortnight. Big extensions often result in some activity in the bond futures at month end. The next major ACGB-maturity driven extension will be at the end of November as ACGB Dec '21 nears maturity, although that is a relatively small bond line (A$16bn) so the effect won't necessarily be as large. We also think it's interesting to note that duration of Semi and ACGB indices has fallen fairly sharply since QE began in November 2020, a possible indication that issuance is skewing toward the QE purchasing tenors."