Smooth Digestion Of Jun-35 Supply, Less Demand

The latest round of ACGB Jun-35 supply sees the weighted average yield print 0.78bps through prevailing mids (per Yieldbroker), extending the recent trend of firm pricing at ACGB auctions.

• That said, the cover ratio decreased to 2.8438x from 3.2687x at the previous auction.
• As outlined in the preview, today’s auction bid was likely constrained by an outright yield that was 35bps lower than the level observed at the November 29 auction and approximately 90bps lower than the cycle high of 5.01% set in early November. A paring in positive sentiment towards longer-dated global bonds was also likely in play ahead of today’s FOMC decision.
• The possible positive factors flagged, namely the line being part of the XM basket and the RBA's removal of its explicit tightening bias yesterday, do not appear to have materially impacted the overall strength of bidding.
• There has been no notable movement in XM futures post-supply, while the bond line was slightly richer versus pre-auction levels in cash trade.