AUSSIE BONDS: ACGB Jun-31 Auction Results

The AOFM sells A$1000mn of the 3.75% 21 April 2037 bond, #TB144:

• Average Yield (%): 4.3899 (prev. 4.4666)
• High Yield (%): 4.3900 (prev. 4.4675)
• Bid/Cover: 4.6400x (prev. 3.6688x)
• Allotted at Highest Accepted Yld as % of Bid at Yld (%): 82.6 (prev. 59.2)
• Bidders: 40 (prev. 41), successful 9 (prev. 12), allocated in full 1 (prev. 4)

Oil prices rose strongly on Tuesday and have continued to rally during Wednesday’s APAC session following the announcement that the US and China would meet over coming days in Switzerland to discuss trade with the de-escalation of tensions the first item to be dealt with. Oil has been worried about the impact of increased protectionism on global oil demand and so the market will watch the talks closely for progress.

• US Treasury Secretary Bessent and Trade Representative Greer will meet China’s Vice Premier Lifeng on the weekend. Bessent noted that current tariff levels are “unsustainable” and that de-escalation needs to occur before they “can move forward”.
• Yesterday’s rally in crude was driven by the EIA revising down its US oil output projection to 13.42mbd in 2025 as it believes that lower prices will drive firms to extract less shale oil.
• WTI rose 3.3% to $59.00/bbl on Tuesday more than unwinding Monday’s losses following OPEC’s announcement of increased output from June. It reached a high of $59.84 but is still trading below that despite the 1.0% increase today. The benchmark is currently around $59.70 and up 2.3% this week. Short-term gains are seen as corrective though and the bear trigger is at $54.67. Initial resistance is at $61.49, 20-day EMA.
• Brent was up 3.0% yesterday to $62.04/bbl after reaching $62.80. It is up 0.8% to $62.66 in today’s APAC trading. Despite this week’s 2.3% increase, a bearish theme persists. Gains over April 9-23 are seen as corrective and so the rise in recent days is likely to be too. Initial support and bear trigger is $58.00, while initial resistance is at $64.46, 20-day EMA.
• Bloomberg reported that US crude inventories fell 4.49mn barrels last week, according to people familiar with the API data. In terms of products, distillate stocks rose 2.24mn but gasoline declined 1.97mn. The official EIA data is out later on Wednesday.

Analysts expect looser market liquidity in May, as authorities step up efforts to expand domestic demand, which will fully offset softer liquidity as government bond issuance peaks, Securities Daily reported. The People’s Bank of China will likely cut the reserve requirement ratio by 0.5 percentage points this month, releasing about CNY1 trillion of long-term liquidity, along with an interest rate cut of 0.3 percentage points to drive down rates of corporate and household borrowing, the newspaper said citing Wang Qing, analyst with Golden Credit Rating.