TD Securities: Maintaining Flexibility

TD Securities note that “the AOFM announcement hardly caused a stir with the issuance outlook remaining relatively clean. Between Jan-Jun'22 the AOFM will issue ~A$60bn in Treasury Bonds, following A$44.3bn issued between Jul-Dec'21.

• “To meet the A$60bn Treasury bond issuance target, the AOFM will introduce a new Nov 2033 line by syndicate and split weekly issuance across two tenders in most weeks. If we assume the syndicated line is roughly A$15bn in size, this leaves A$45bn to be issued across weekly tenders.”
• “The AOFM has again refrained from providing estimated weekly issuance levels. This is really to provide it with flexibility. Weekly issuance between Jul-Dec '21 was mostly between A$1.5-2.8bn, averaging A$1.85bn per week. Between Jan-Jun '22 we estimate weekly issuance to be ~A$1.95bn, but there is scope for this to vary.”
• “Consistent with the AOFM's desire for flexibility, the new syndicated Nov '33 has been earmarked to be issued in the "final quarter" of 2021-22. Historically the AOFM has announced a new issue early in the calendar year. However, by pushing out the issue of the new line, it has removed imminent expectations of a new syndicate and hence a drag on markets.”
• “There was no mention of longer dated issuance and its absence implies the AOFM's intention and preference to not issue into longer dated lines. Any taps are likely to be opportunistic. As such we retain our bias for the ACGB 10s30s curve to flatten.”
• “The Linker program is ~75-80% complete. The intention is to continue with 2 tenders in most months.”
• “Last of all, the AOFM noted regular issuance of T-notes will continue. Again there is no guidance on weekly issuance and this is consistent with affording the AOFM flexibility in response to evolving cash needs.”