23 May – 27 May 2016

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By now participants in global bond markets are starting to focus on the upcoming June FOMC meeting. The battery of FOMC members’ speeches in the last two weeks talking about the chances of a rate rise should have got everyone’s attention. These speeches were capped with a speech late in the week (US time) by US Fed chief Janet Yellen who said the US economy is improving. Second estimate US Q1 was revised up during the week from 0.5% to 0.8% and if growth and the labour market continue improving “it’s appropriate for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate”. ANZ described it “a deliberate move on the part of the Fed to steer the market towards prospects of near-term tightening.”

bonds-yield-27may

Perhaps these central bank “open-mouth operations” were the reason behind the small divergence in US-European bond yields. Yields in advanced economies all finished the week lower, with the exception of the US where the 10 year bond yields rose 1 basis point to 1.85%. Comparable French, German, UK and Japanese bond yields all fell 1-2bps although for some reason Italian 10 year bond yields fell 12bps to 1.36%. In Australia, the 3 year bond yield fell 1bp and the 10 year bond yield 4bps to 1.59% and 2.26% respectively.

This week it was back to two vanilla bond tenders and one Treasury note tender. $900 million November 2027s and $1 billion October 2019s were sold with coverage ratios of 2.50 and 3.01 respectively.

Complete list of government and corporate debt issues
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AUST GOVT BONDS

MATURITYCOUPON
(%)
ISSUE
SIZE ($M)
CLOSING
YIELD
Δ WEEKΔ MONTHWEEK
HIGH
WEEK
LOW
15-Jun-164.75219001.74-0.01-0.311.761.74
15-Feb-176.00210961.67-0.02-0.391.691.67
21-Jul-174.25189001.670.00-0.381.681.67
21-Jan-185.50205001.630.00-0.421.651.63
21-Oct-183.25135001.62-0.01-0.431.641.62
15-Mar-195.25214471.59-0.01-0.441.611.59
21-Oct-192.75117001.61-0.01-0.451.641.61
15-Apr-204.50203971.64-0.01-0.441.661.64
21-Nov-201.7550001.73-0.02-0.431.761.73
15-May-215.75222991.79-0.03-0.431.821.79
15-Jul-225.75182001.93-0.04-0.431.961.93
21-Apr-235.50213002.01-0.04-0.422.062.01
21-Apr-242.75229002.13-0.05-0.402.182.13
21-Apr-253.25189002.20-0.05-0.382.252.20
21-Apr-264.25169002.25-0.05-0.382.312.25
21-Apr-274.75151002.32-0.04-0.372.372.32
21-Apr-293.2597002.49-0.05-0.352.542.49
21-Apr-334.5098002.69-0.06-0.332.752.69
21-Jun-352.7542502.87-0.07-0.322.932.87
21-Apr-373.7575002.91-0.07-0.322.982.91
21-Jun-393.2540003.02-0.06-0.313.083.02

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