19 Sep – 23 Sep 2016

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The news of a 30 year benchmark bond to be issued in the first week of October has been largely factored in by now and so there was not much to move Australian bonds yields around this week except for central bank meetings in Tokyo and Washington which took place in the middle of the week.

Westpac’s take on the outcomes of each meeting is pretty similar; long end rates are unlikely to rise in either market and therefore unlikely to rise here. The Bank of Japan’s move is likely to “provide a cap to long term rate rises” while the Fed will raise rates, beginning in December, while going out of its way to signal the gradual nature of future rises. Bond markets agreed and by the end of the week, 10 year yields were lower. That wasn’t the initial reaction in Japan where 10 year yields spiked on the day and actually went into positive territory (ie: above 0.00%) for a brief time but they soon got with the programme and finished the week lower.

Local yields initially rose following the BoJ decision but once the US Fed decision and comments were released we took the cue in the same way as the Japanese and promptly followed US yields lower. 3 year bond yields finished the week steady at 1.56% while 10 year bond yields fell 11bps to 2.01% and 20 year bond yields fell 14bps to 2.60%.

Offshore it was pretty much the same except in Japan were the yield on a 10 year bond fell just the one basis point to -0.05%. In the US the yield fell 7bps to 1.62%, in the UK it fell 14bps to 0.63% and Germany’s yield fell 9bps to -0.08%.

The AOFM looks as if it was making up for lost time this week as it held three bond tenders, one Treasury note tender and one bond buyback tender. $400 million April 2029s, $900 million November 2027s and $1 billion May 2021s were issued with coverage ratios of 3.1056, 2.916 and 3.707 respectively. The buyback tender bought back $400 million October 2018s with $1.425 billion tendered.

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AUST GOVT BONDS

MATURITYCOUPON
(%)
ISSUE
SIZE ($M)
CLOSING
YIELD
Δ WEEKΔ MONTHWEEK
HIGH
WEEK
LOW
15-Feb-176118281.630.010.151.631.63
21-Jul-174.25189001.630.030.171.641.62
21-Jan-185.5205001.600.030.201.601.58
21-Oct-183.25181001.600.030.191.631.59
15-Mar-195.25229471.600.000.211.631.60
21-Oct-192.75217001.620.010.231.661.62
15-Apr-204.5233971.630.000.241.671.63
21-Nov-201.75152001.68-0.010.231.731.68
15-May-215.75243991.71-0.030.211.771.71
15-Jul-225.75214001.80-0.060.201.881.80
21-Apr-235.5213001.85-0.070.181.951.85
21-Apr-242.75247001.93-0.090.172.041.93
21-Apr-253.25261001.97-0.120.142.091.97
21-Apr-264.25291002.00-0.110.142.132.00
21-Apr-274.75256002.04-0.110.132.172.04
21-Nov-272.75104002.10-0.110.142.232.10
21-May-282.2570002.14-0.120.132.282.14
21-Apr-293.25120002.20-0.130.142.352.20
21-Apr-334.5107002.40-0.130.162.552.40
21-Jun-352.7555502.58-0.140.182.722.58
21-Apr-373.7588002.64-0.140.202.792.64
21-Jun-393.2540002.76-0.150.222.922.76