U.S. Tsys Support, With Some Positives Also Seen In AOFM Guidance

he early/overnight steepening has unwound, leaving YM +0.5 and XM +1.0, with the dynamic in the U.S. Tsy space seemingly in the driving seat, although the latest update from the AOFM would have also been supportive. The entire cash curve now sits unchanged to a little richer on the day, while swap spreads sit at unchanged to tighter levels.

• The AOFM reminded us that Treasury Bond issuance for FY20-21 is expected to be around A$230bn, of which A$153.5bn has been completed. The fact that the run rate is well ahead of pro-rata requirements allowed the AOFM to trim its typical weekly bond tender guidance to A$2-3bn in most weeks (from the previous A$3-4bn), meeting expectations for a lower weekly burden given the aforementioned run rate.
• The announcement that the AOFM will issue a new Bond line maturing in November 2032 via syndication provided no shock given the previous guidance.
• The AOFM also noted that it does not plan to introduce any further additional Treasury Bond lines (including third calendar year maturities) during FY20-21 after flagging that as a potential move in previous communique, another incremental positive for the space.
• The AOFM reaffirmed that it will "continue regular issuance of Treasury Notes. Weekly tender volumes will vary according to the AOFM's cash management requirements." The weekly issuance slate that accompanied the release noted that next week's T-Note offering will total for A$1.5bn, that represents the second consecutive week that particular amount has been offered.