RBC On ACGB Sep '26 Pricing

RBC note that "the AOFM announced today that it would issue a new 21-Sep-2026 nominal bond via syndication in the week starting 21 September (i.e., next week). This is already the fourth of five new bond syndications flagged by the AOFM for 2020-21, so we suspect that there could well end up being more than this by the time the year is out. Of the already planned bonds, only the new long 2032 will be left once the Sep-26 is out of the way. We see fair value at 3yr EFP+25bp on the basis of current secondary market pricing and assuming a 0.5% coupon. This is equivalent to a yield of 0.5375%, 6.75bp over the Apr-26s, and an ASW of +13.5bp. A lower coupon of 0.25% would demand a slightly higher spread (another ~0.15bp on top). Our expectation for launch range is EFP+25-28bp, and if the Nov-31 deal is anything to go by, then final pricing should be pretty close to fair value - the Nov-31s ended up pricing only 0.25–1.5bp cheap to where we saw fair value at the time."