(Bloomberg) -- Australia’s sale of short-term notes drew the strongest demand since 2021, highlighting investor expectations that the central bank will snap its string of 10-straight interest-rate hikes next week.

Buyers offered to acquire 7.6 times the A$500 million ($336 million) of November 2025 bonds, more than at any other auction since August 2021, according to the Australian Office of Financial Management. That’s the eighth-highest bid-to-cover ratio on record, with 2021 spikes coming when the central bank was busy buying government bonds.

The Reserve Bank of Australia’s purchases that year outpaced net issuance, resulting in poor bond market liquidity that is still being experienced now. Friday’s strong demand came with the RBA meeting looming large next week. While economists are divided on another rate hike, swaps traders see about 80% odds that policymakers will stand pat. 

“The AOFM rarely issues 2025 maturity bonds, so demand tends to be quite high, especially as some investors have mandates that limit them to shorter maturities,” said Kenneth Crompton, a senior fixed income strategist at National Australia Bank in Sydney. “The RBA owns around 50% of most bonds in the three-year futures basket.”

The benchmark three-year Aussie yield has fallen more than 50 basis points this year to 2.97%, its biggest gap below the RBA cash rate since 2012, when the central bank rate was slashing borrowing costs. 

©2023 Bloomberg L.P.