RBC On ACGB Nov '32 Syndication

RBC note that "the AOFM today announced plans to launch a new benchmark 21 Nov 2032 nominal bond next week. We see fair value at around 10-Year EFP+13.5bp and would consider 12–15bp to be a fair launch range. The AOFM's last syndicated deal was the Sep '26 issued in September last year, and the last 10-Year issue was one month prior (the Nov '31s, issued in August). We think a deal size of around $15bn might make sense, somewhat below that of the last two (which were $21bn and $25bn, respectively) due to the AOFM's strong cash position. In line with the last few syndications, and supported by AU continuing to look cheap on a hedged yield basis and on global curve steepness comparisons, we'd expect around 50% of the line to be bought by offshore accounts. We note that the market has reacted to today's announcement by cheapening bonds, with XMs selling of off 3-4bp immediately after the announcement at midday, resulting in the 3-10s futures curve steepening 3-4bp and sending AU/US 10-Year slightly wider. We would expect some of this underperformance to reverse after the deal prices next week."