Smooth Digestion Of Jun-35 Supply, Stronger Demand Present

The latest round of ACGB Jun-35 supply sees the weighted average yield print 1.27bp through prevailing mids (per Yieldbroker), extending the recent trend of firm pricing at ACGB auctions.

• The cover ratio of 3.3438x was also higher than the 3.0171x at the previous auction.
• An expectation of continued firm pricing at auctions proved correct with a higher outright yield and steeper curve seemingly supporting demand at today’s auction.
• The possible negative factors flagged in our auction preview, namely the prevailing bearish sentiment towards longer-dated global bonds, the line not being part of the XM basket and the potential necessity to increase the line "up to size", do not appear to have constrained the overall strength of bidding.
• There has been no notable movement in XM futures post-supply, while the bond line was little changed versus pre-auction levels in cash trade.