AUSSIE BONDS: Smoothly Absorbed But Less Demand

The latest ACGB Mar-36 auction saw solid demand, with the weighted average yield coming in 0.43bps through prevailing mid-yields, according to Yieldbroker, continuing the trend of firm pricing at recent ACGB auctions.

• Moreover, the cover ratio nudged higher to 3.5167x from 3.4917x.
• As highlighted in our preview, bidding at today’s auction faced an outright yield that was roughly similar to the previous auction level and about 20bps below the late February peak.
• However, the 3/10 yield curve was flatter than the previous auction level and sat 40bps flatter than its recent high.
• There has been a slight richening in XM and the cash line in post-auction trading.

The AOFM sells A$1200mn of the 4.25% 21 March 2036 bond:

• Average Yield (%): 4.3457 (prev. 4.3788)
• High Yield (%): 4.3475 (prev. 4.3800)
• Bid/Cover: 3.5167x (prev. 3.4917x)
• Allotted at Highest Accepted Yld as % of Bid at Yld (%): 46.1 (prev. 84.6)
• Bidders: 36 (prev. 41), successful 19 (prev. 17), allocated in full 8 (prev. 9)

The overnight range was 1.1452 - 1.1513, the Cross is dealing in Asia around 1.1495. The Cross initially looked to have stalled ahead of 1.1500 as the market was hoping for a more hawkish RBA, but some more poor NZ employment data this morning has given it the nudge it needed to have a peek above 1.1500. This 1.1500 area remains tough resistance and I will be watching the price action to see if the market can build any momentum above here. Above 1.15/16 and the market will start to get bulled up as the focus will turn toward the 1.2000 area and beyond.

• MNI BRIEF: New Zealand Unemployment 5.3% In Q3. The underutilisation rate edged up to 12.9% from 12.8%, while the employment rate eased to 66.6% from 66.8%. The Reserve Bank of New Zealand expects unemployment to reach 5.2% by December.

Fig 1: AUD/NZD spot Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P