JGBS: Subdued Start To Tokyo Session After Natl CPI

The Australian Office of Financial Management (AOFM) will today A$1000mn of the 3.25% 21 April 2029 bond, issue #TB138. The line was last sold on 4 December 2024 for A$700mn.

• Several factors could influence bidding at today’s auction. The bond’s outright yield has fallen dramatically in April as global equity markets reacted negatively to President Trump’s tariff announcements. The outright yield now sits 50-55bps lower than the previous outing and ~80bp below the November 2024 peak.
• Market expectations for RBA easing in 2025 have also strengthened in April. A 50bp rate cut in May is given a 13% probability, with a cumulative 115bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• The line’s inclusion in the YM basket is also likely a positive alongside haven demand.
• Overall, another round of well-received supply is expected.
• Results are due at 0200 BST / 1100 AEST.

The S&P Global preliminary April PMIs showed steady but moderate growth at the start of Q2 with the composite at 51.4 down slightly from 51.6 with services printing inline. Manufacturing activity eased slightly with the PMI at 51.7 after 52.1 in March, but the fourth consecutive month in positive territory after spending most of 2024 contracting. Strength was driven by the domestic economy though with global trade developments weighing on exports and confidence.

• Growth in new business rose in April to its fastest in two years with strength coming from services but manufacturing also saw a moderate pickup. This drove continued hiring, which remains at a 23-month high, but also the strongest rise in outstanding business in almost three years, according to S&P Global.
• Stronger demand resulted in a deterioration in the inflation picture with firms able to pass on higher costs to customers. Input inflation remains elevated driven by raw materials, energy, wages and imports due to the weaker AUD. Selling price increases rose this month with manufacturing at its fastest in more than 2 years.
• New business appears to be concentrated in the domestic economy though with exports falling for the second straight month due to increased uncertainty over US trade policy.
• Fears of a global trade war and resulting slower global growth weighed on confidence regarding the outlook with it falling to its lowest in 6 months. 

Australia S&P Global PMIs

The Australian Office of Financial Management (AOFM) will today sell A$1000mn of the 3.25% 21 April 2029 bond, issue #TB138. The line was last sold on 4 December 2024 for A$700mn. The sale drew an average yield of 3.9558%, at a high yield of 3.9575% and was covered 4.2143x. There were 33 bidders, 10 of which were successful and 5 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 50.0%.

• This week's ACGB supply is smaller with the usual weekly issuance of A$1.5bn.
• The previous round of Apr-29 supply saw the weighted average yield print 1.42bps below the prevailing mid-yield. While the cover ratio declined from 4.7486x at the prior auction, it remained robust at 4.2143x, underscoring continued investor interest.
• According to the Budget 2025-26 Issuance Program Update from the Australian Office of Financial Management (AOFM), total issuance of Treasury Bonds (including Green Treasury Bonds) in 2025-26 is expected to be around $150 billion. Issuance of Treasury Indexed Bonds by tender is expected to be between $2 billion and $3 billion (additional issuance by syndication may be considered).
• For 2024-25, issuance of Treasury Bonds has been revised to around $100 billion, including around $2 billion of Green Treasury Bonds. Treasury-Indexed Bond issuance will be around $3 billion.
• Results are due at 0200 BST / 1100 AEST.