18 Jan – 22 Jan 2016

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Yields in major international markets rose except for those in the eurozone after ECB President Mario Draghi spoke of “downside risks” and indicated further consideration of ECB monetary policy easing in March. German and French 10 year bond yields fell 6bps and 8bps respectively while UK, US and Australian 10 year bond yields partially reversed the falls from previous weeks and rose 5bps, 1bps and 4bps respectively.

There was little in the way of domestic data to influence local bond markets and so a focus was on offshore (i.e. US) moves. US retail sales data released on the Friday night Australian time were weak and after US bond yields fell significantly one could have expected Australian yields to follow suit. However, domestic bond yields barely moved and apart from one other day (see above), the trend over the week was for higher yields. 3 year yields rose 1bp to finish the week at 1.93%, 10 year bond yields rose 4bps to close at 2.73% and the 20 year bond finished the week at 3.23%, up 5bps over the week.

govbonds-22jan

In place of the standard two Commonwealth bond tenders and one short term Treasury note tender there was a large syndicated offer for a new benchmark 10 year bond. Bids of over $8.5 billion were received with a final issue size of $4.6 billion 21 November 2027 bonds. The coupon for the new issue was 2.75%. The size of the issue is approximately two weeks’ worth of standard government bond issuance.

ANZ put together a chart of the buyers (see below) indicating that around 73% was sold to domestic buyers. This is above the general level of foreign holders of Australian government debt but ANZ notes 30.1% was allocated to “trading desks”. This perhaps suggests the bonds will be on-sold to other investors, both domestic and foreign, in the short term. Of the foreign buyers Asian buyers (ex-Japan) took 10.3%, UK 5.3%, Europe 2.5% and ‘other’ 8.2%. Somewhat surprisingly Japan only took 0.4% of the issue, well below their percentage holding of ACGBs.

govbonds-yieldreport
See our New Debt Issues for a 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-164.75219002.010.000.002.011.99
15-Feb-176.00210961.91-0.07-0.131.941.90
21-Jul-174.25189001.91-0.06-0.161.941.89
21-Jan-185.50205001.950.00-0.171.951.92
21-Oct-183.25135001.930.01-0.221.931.89
15-Mar-195.25214471.940.01-0.241.941.90
21-Oct-192.75117002.000.02-0.232.001.96
15-Apr-204.50203972.030.01-0.232.031.99
21-Nov-201.7550002.140.02-0.222.142.10
15-May-215.75222992.210.03-0.202.212.16
15-Jul-225.75182002.370.04-0.192.372.32
21-Apr-235.50213002.480.03-0.192.482.43
21-Apr-242.75229002.610.04-0.192.612.57
21-Apr-253.25189002.670.04-0.182.672.63
21-Apr-264.25169002.730.04-0.182.732.69
21-Apr-274.75151002.800.03-0.182.802.76
21-Apr-293.2597002.970.04-0.172.972.93
21-Apr-334.5098003.130.04-0.183.133.09
21-Jun-352.7542503.270.05-0.173.273.22
21-Apr-373.7575003.280.05-0.173.283.24
21-Jun-393.2540003.340.06-0.173.343.29

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