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Nov-33 Supply Absorbed But Less Demand Seen

AUSSIE BONDS

The latest round of ACGB Nov-33 supply sees the weighted average yield print 0.86bp through prevailing mids (per Yieldbroker), extending the recent trend of firm pricing at ACGB auctions.

  • The cover ratio of 2.9688x however falls significantly short of the previous auction's 4.1286x. This continues the recent run of auctions, which have seen cover fall from very comfortable levels of around 4.0x to less comfortable 3.0x levels.
  • While today’s auction was adequately absorbed, as outlined in the auction preview, the 70bps decline in the outright yield and the 15-20bps flattening of the 3/10 curve since late Oct/early Nov peaks appear to have led to a tapering of demand.
  • A less hawkish RBA, positive sentiment towards longer-dated global bonds and the line’s inclusion in the XM basket however are all likely to have contributed to the bid in today's auction.
  • Post-supply, there has been a small cheapening in XM futures, with the bond itself experiencing a 0.5bp cheapening in comparison to its pre-auction levels.
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