NAB: Month-End Index Extension Is Relatively Modest

NAB note that "the month-end extension of the domestic bond indices is relatively modest, with the Bloomberg AusBond 0Y+ index modified duration expected to increase by about 0.06. The average index extension (since the October 2015 change to remove upcoming maturities at the end of the month prior to maturities) is 0.075, so the extension this month is not unusually large. The end-April index extension will be more significant, with nearly A$30bn of maturing stock to be removed from the index including the A$26bn ACGB May '21. This extension continues to present, we think, the most likely window for the AOFM to issue the new Nov '32 ACGB prior to the end of the fiscal year. Beyond the monthly fixed income index extensions, other quarter end dynamics such as funding market spread widening or FX basis spikes remain extremely benign given the plentiful liquidity that persists in the market."