Global equity markets were put through the wringer as concerns regarding global growth came to the fore and commodity markets tanked with oil going below USD$30 a barrel and iron ore below USD$40 a tonne. There are multiple forces at work in the commodity and equity markets and this is creating lower global growth forecasts and a lower likelihood of inflation (or possible deflation). As investors retreated out of these markets the logical place to go was the bond market where capital preservation was the order of the day (or week as it turns out). Bond markets saw yields fall as investors bid up bond prices, especially at the longer maturities. Investors generally ignored the strong employment data out of the US which is typically a reason for yields to go higher, although shorter-dated Treasury bond yields are still being anchored by potential Fed rate increases.
Domestic bond markets generally followed offshore leads and yields fell on four days out five. 3 year yields fell 8bps to finish the week at 1.92%, 10 year bond yields fell 9bps to close at 2.69% and the 20 year bond finished the week at 3.18%, down 8bps over the week.
Yields in almost all major international markets fell across the week with the exception of Italy, where yields on 10 year bonds rose by 4bps. French and Japanese yields fell 1bp, German yields fell 4bps, US yields fell 8bps and UK fell 11bps.
There were two Commonwealth bond tenders for the week and one short term Treasury note tender. $900 million of April 2026s and $800 million of July 2022s were issued with coverage ratios of 2.818 and 2.088 respectively.
AUST GOVT BONDS
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