RBC On The AOFM 22/23 Issuance Task

RBC note that “following the release of the Budget yesterday, the AOFM this morning announced a A$125bn gross nominal bond funding task plus ~A$2.5bn in linkers over 2022-23.”

• “The task is substantially less than the A$156bn which a straight read of net issuance from budget numbers (net AGS outstandings rise by A$71bn) plus A$85bn in maturities would suggest. The A$85bn refi task includes the A$25bn Jul-22s, so perhaps given how soon this is, the AOFM has fully pre-funded the maturity already, which would be sensible and explain the delta.”
• “The gross nominal task for the year almost gone (2021-22) has also been shrunk slightly given the better underlying position, from A$105bn to A$100bn. There was arguably room here for an even bigger shrinkage given that the underlying cash balance improved by A$19.4bn since MYEFO, but this also likely contributed to evening out the 2021-22 and 2022-23 tasks. To date, A$69.5bn of this year’s task has been completed, still slightly behind pro-rata pace but presumably with a sizable new Nov-33 still to come which would catch up that gap.”
• “As per updated AOFM practice, we will receive more guidance on planned new bonds for the first half of 2022-23 on July 1. We would at a minimum expect a new early H1 2034 bond to be issued at some point through Jul-Dec 2022, with the possibility that a new long end issue (2043 or even 2053) is also considered. These would be driven by underlying funding requirement.”
• “Depending on how many new lines are issued, regular weekly tender issuance should probably continue to average A$2-2.5bn per week. That is, there are likely no major changes to current tender settings despite a A$25bn lift in the gross task from this year to the next.”