RBC Adjust Fair Value Estimate Of ACGB Nov-33

tRBC note that “the AOFM today launched the new Nov-33 at a range of -1.5 to +1.5bp over the June 10-Year futures. Refreshing our models today, we estimate fair value to be -0.5bp. Anything above this level looks cheap relative to surrounding bonds. When the bond was first announced just over a week ago, we estimated fair value to be around EFP-0.75bp. Since then, the curve has sold off and steepened, so our refresh reflects this slight steepening, adjusted for a slightly higher coupon (3% versus the 2.75% we used for our first estimate). Given that the Apr-33s and Jun-35s are sitting quite steep relative to the shorter basket bonds, there is also the chance that this segment of the curve could all perform once the deal is out of the way, though this might depend on how much volume the AOFM decides to issue.”