Smooth Digestion Of Jun-35 Supply

The latest round of ACGB Jun-35 supply sees the weighted average yield print 0.72bps through prevailing mids (per Yieldbroker), extending the recent trend of firm pricing at ACGB auctions.

• The cover ratio also increased slightly from 3.2062x at the previous auction to 3.2687x.
• An expectation of continued firm pricing at today’s auction on the back of the prevailing bullish sentiment towards longer-dated global bonds proved correct.
• This came despite the current outright yield for this line being 15-20bps lower than the level observed at the October 4 auction and approximately 50bps lower than the cycle high of 5.01% set in early November.
• The possible negative factors flagged in our auction preview, namely the line not being part of the XM basket and the potential necessity to increase the line "up to size", did not appear to have materially constrained the overall strength of bidding.
• There has been no notable movement in XM futures post-supply, while the bond line was slightly cheaper versus pre-auction levels in cash trade.