AUSSIE BONDS: Very Strong Demand Seen For Nov-33 Supply

The latest ACGB Mar-36 auction saw strong demand, with the weighted average yield coming in 0.22bps through prevailing mid-yields, according to Yieldbroker, continuing the trend of firm pricing at recent ACGB auctions.

• Moreover, the cover ratio nudged higher to 3.4917x from 3.3111x.
• As highlighted in our preview, bidding at today’s auction faced an outright yield that was roughly 10-15bps higher than the previous auction level and about 20bps below the late February peak.
• However, the 3/10 yield curve was slightly flatter than the previous auction level and sat 30-35bps flatter than its recent high.
• There has been no material movement in XM or the cash line in post-auction trading.

RBNZ-dated OIS pricing is slightly firmer across meetings today ahead of today’s RBNZ Policy Decision.

• Easing expectations show 36bps of easing priced for today’s meeting, with a cumulative 63bps by November 2025 and 73bps by February 2026.
• Today’s decision is likely to have a material impact on pricing. A 50bps cut could bring forward the full 75bps of cumulative easing to November, while a 25bps cut would likely push at least half of that 25bps into early 2026.
• Notably, pricing is 12-27bps softer across meetings versus 18 September’s pre-Q2 GDP levels.
• Both the production and expenditure-based GDP measures fell 0.9% q/q in Q2, the weakest since the pandemic. The RBNZ had expected a 0.3% q/q decline.

Figure 1: RBNZ Dated OIS Current vs. Pre-Q2 GDP (%)

Source: Bloomberg Finance LP / MNI 

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

• Average Yield (%): 4.3788 (prev. 4.2569)
• High Yield (%): 4.3800 (prev. 4.2600)
• Bid/Cover: 3.4917x (prev. 3.3111x)
• Allotted at Highest Accepted Yld as % of Bid at Yld (%): 84.6 (prev. 24.0)
• Bidders: 41 (prev. 33), successful 17 (prev. 16), allocated in full 9 (prev. 13)