26 Oct – 30 Oct 2015

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The Australian 3 year bond rate finished the week at 1.77%, down 2bps and near the middle of the 8 bps range between the low of 1.74% and the high of 1.82% during the course of the week.  The trading range was slightly more than the previous week. The 10 year bond rate finished the week at 2.64%, unchanged and also near the middle of the week’s trading range. The implied yield from the recently established 20 year bond futures contract finished the week at 3.20%, unchanged and in the middle on the low of 3.15% and high of 3.26% for the week.

There were two Commonwealth bond tenders: the first was for a $900m of April 2027s; the second was for $800m of July 2022s. The coverage ratios were 2.794 and 2.70 respectively.

Domestically, the release of the September quarter CPI figures were not definitive in their implications for a 2015 rate cut, although cash markets are indicating a rate Christmas cut is more likely than not. It did, however, confirm inflation is not a danger in the Australian economy for now while entrenching the idea of at least one rate cut next year and a second as being highly likely. The RBA is a reluctant rate-cutter and has previously spoken of the limits of monetary policy. It is unsure whether a rate cut will generate the desired growth and so seems keen to keep some rate cut ammunition up its sleeve for when it might really be needed.

On the global stage, all attention was focussed on the US Fed’s October FOMC meeting. The statement which emerged was a surprise on two fronts; September’s reference to international (read Chinese) issues disappeared and there was a specific reference made to the December meeting in regards to the appropriateness of raising the official rate. In response, US cash markets moved closer to pricing a 50% chance of a hike in December and US 10 year yields rose 6bps. Yields in the UK rose a substantial 17bps but so far there has been very little effect on yields in the rest of the world with European yields moving up or down by a point or two.

The US/Australia 10 year spread continued its downward trend and fell another 5bps to 50bps. It’s now 8bps below the 2015 average of 58bps and decidedly closer to the 2015 low of 34bps and well away from the 2015 maximum of 92bps.

Aus Govt Bonds 30102015

See our New Debt Issues for a complete list of government and corporate debt issues
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MATURITYCOUPON
(%)
ISSUE
SIZE ($M)
CLOSING
YIELD
Δ WEEKΔ MONTHWEEK
HIGH
WEEK
LOW
WEEKLY T/OVER
$ VALUE
15-Jun-164.75219001.780.00-0.181.801.760
15-Feb-176.00210961.75-0.02-0.181.791.7313,345
21-Jul-174.25189001.74-0.04-0.161.801.7324,976
21-Jan-185.50205001.74-0.04-0.121.821.7369,730
21-Oct-183.25135001.79-0.02-0.111.861.78520,870
15-Mar-195.25214471.81-0.03-0.111.871.79503,105
21-Oct-192.75117001.89-0.03-0.121.951.870
15-Apr-204.50203971.94-0.04-0.132.021.939,896
21-Nov-201.7550002.06-0.03-0.142.142.0586,824
15-May-215.75222992.12-0.04-0.132.202.110
15-Jul-225.75182002.30-0.02-0.132.352.276,401
21-Apr-235.50213002.40-0.01-0.122.462.370
21-Apr-242.75229002.540.00-0.092.592.50520,851
21-Apr-253.25189002.610.00-0.082.662.583,057
21-Apr-264.25169002.680.00-0.092.732.64517,410
21-Apr-274.75151002.750.00-0.092.802.710
21-Apr-293.2597002.920.00-0.092.972.89521,935
21-Apr-334.5098003.100.01-0.073.133.060
21-Jun-352.7542503.230.00-0.063.263.190
21-Apr-373.7575003.250.01-0.073.293.2115,486

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