Summary: ACGB bond generally decline in Australia; ACGB 10-year spread to US Treasury yield falls to -35bps; 10-year bond yields up in US, UK, major European markets; $2.8 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields started the week with little change and then rose moderately over the following two days. Yields slumped on Thursday and then slipped a little further at the end of the week. By this point, the 3-year ACGB yield had lost 2bps to 3.81%, the 10-year yield had slipped 1bp to 4.27% while the 20-year yield finished unchanged at 4.56%. The spread between US and Australian 10-year Treasury bond yields moved from -25bps to -35bps.
Over in the US, 10-year bond yields rose noticeably early in the week before falling midweek. Yields rose modestly in net terms over the remainder of the week.
March’s retail sales report was released at the start of the week. Total sales increased by 0.7% over the month, more than expected but less than February’s 0.9% rise.
March industrial production figures were released the next day. Industrial production increased by 0.4% over the month, in line with expectations.
The Conference Board’s March reading of its Leading Index posted a 0.3% fall a couple of days later.
The US Fed’s Nowcast model was updated as usual at the end of the week. The March 2024 quarter forecast remained unchanged at 2.3% (annualised) while the June quarter forecast ticked up from 2.6% to 2.7%.
By this point, US 2-year and 10-year Treasury bond yields had both gained 9bps to 4.99% and 4.62% respectively while the 30-year yield finished 8bps higher at 4.71%.
In major euro-zone markets, 10-year bond yields followed similar patterns to their US counterpart except the midweek fall was smaller.
The euro-zone’s February industrial production figures were released at the start of the week. Output rose by 0.8% over the month, slightly less than expected. However, output was still 6.4% lower than in February 2023.
Germany’s ZEW April survey was published the next day and it indicated the ZEW Economic Sentiment index had increased from March’s reading of 31.7 to 42.9. ZEW’s current conditions index fell from -80.5 to -79.2. ZEW President Professor Achim Wambach said, “A recovering global economy is boosting expectations for Germany, with half of the respondents anticipating the country’s economy to pick up over the next six months.”
By the end of the week, the German 10-year bund yield had gained 14bps to 2.50% while the French 10-year OAT yield had added 15bps to 3.01%. The Italian 10-year BTP yield increased by 16bps to 3.89% over the week while the British 10-year gilt yield finished 9bps higher at 4.33%.
The AOFM held one bond tender this week; $800 million of November 2033s were issued at a yield of 4.36%. There were the usual two Treasury note tenders as well which raised $2.0 billion on a short-term basis.
The gross value of all bonds issued by the AOFM in the 2023/2024 financial year (not taking into account short-term Treasury note tenders) is $35.15 billion. There are currently $858.15 billion of Treasury bonds and $40.435 billion of Treasury index-linked bonds on issue. The next series to mature does so on 21 April 2024 when $35.90 billion worth of bonds are due. There are also $28.00 billion of short-term Treasury notes outstanding.