Yields in major international markets were generally trending down over the week but the decision at the end of the week by the Bank of Japan to offer a negative overnight interest rate was like a shot of steroids as it was unexpected. 10 year bond rates tumbled on the day; US and Japanese rates each fell 13bps to 1.92% and 0.09% (yes, 0.09%, that’s not a typo) respectively, while UK and French rates both fell 15bps to 1.56% and 0.64% respectively. Australian 10 year rates fell by a more modest (but still large for one day) 9bps to 2.64%, the lowest yield since October.
US rates may have fallen further but for the release of fourth quarter GDP figures which indicated the US economy grew by 0.7% for the quarter, less than the 0.8% which was expected but still enough to temper enthusiasm for bonds. Fears of a stalling US economy were not realised and some investors who had bought bonds on the expectation of weak growth figures are said to have trimmed their holdings after the report’s release.
After the previous week’s issue of a new 10 year benchmark bond, it was back to the standard two Commonwealth bond tenders and one short term Treasury note tender. $800 million of April 2020s and $900 million of April 2025s were issued with coverage ratios of 4.125 and 2.39 respectively.
AUST GOVT BONDS
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