NAB: Gross FY21 Treasury Bond Issuance Could Total ~A$215bn

NAB note that "at the current run rate gross Treasury bond issuance for FY21 could total around A$215bn vs earlier projections of "around A$230bn." In early January the AOFM confirmed that Treasury bond issuance for 2020-21 would be "around A$230bn" and that issuance via tender would be "at a rate of A$2-3bn in most weeks" and a new Treasury bond line maturing in November 2032 would be launched by syndication. Since this announcement, weekly tenders have averaged A$2.05bn and with three months to go before the end of the financial year the AOFM has completed 77% of its planned treasury bond program. As we have discussed previously we think there is a strong chance the AOFM syndicates the new Nov '32 bond in April. The volume size of this deal could be between A$15-20bn. Even with a large A$15-20bn syndicated deal, if weekly issuance tenders remain at A$2bn we calculate that gross Treasury bond issuance will total around A$213bn to A$218bn vs the AOFM's announced estimate of "around A$230bn." Our estimates also suggest that at its current weekly issuance run rate for Treasury note issuance the AOFM is running down Treasury note issuance at a slightly higher pace than originally estimated. This reduction in overall issuance would align with the improvement's currently being seen in the budget numbers. The Government's Monthly Financial Statements are showing the budget is running better than expected and "It is conceivable the run-rate of a 10% improvement in the cash deficit is sustained for the rest of 2020-21, which would equate to the underlying cash deficit being A$20bn better off (possibly cutting the deficit to A$177bn from the current A$197.7bn projected)."