Summary: ACGB bond yields rise in Australia; ACGB 10-year spread to US Treasury yield rises to +13bps; 10-year bond yields down in US, most major European markets; $3.5 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields started the week with a noticeable increase which was followed by more modest increases over the next two days. Yields then drifted lower for the remainder of the week. By the end of it, the 3-year ACGB yield had gained 8bps to 4.13%, the 10-year yield had added 9bps to 4.41% while the 20-year yield finished 11bps higher at 4.72%. The spread between US and Australian 10-year Treasury bond yields rose from -8bps to +13bps.
Over in the US, 10-year bond yields rose on Monday and then fell on each of the remaining days of the shortened week.
The ISM’s June reading of its manufacturing PMI came out at the start of the US week. The index slipped further below 50, from 48.7 to 48.5, below expectations and further into contractionary territory.
May’s JOLTS report was released the next day. Total quits, separations and openings all increased. The quit rate remained unchanged at 2.2% after revisions.
The ISM’s June non-manufacturing PMI was released midweek. The index fell back from 53.8 to 48.4, below the generally expected figure of 52.3.
Minutes of the FOMC June meeting came out that same day. They indicated the FOMC thinks US inflation rates will continue slowing and rate cuts are pretty much just a matter of time.
At the end of the week, June’s non-farm payrolls report produced a rise in employment above expectations but with substantial downward revisions to the past two months’ figures. Also, the jobless rate ticked up from 4.0% to 4.1%, although the participation rate also ticked up to 62.6%.
The New York Fed’s Nowcast model was also updated. The June 2024 quarter forecast declined from 1.90% (annualised) to 1.80%, as did the September 2024 quarter forecast likewise slipped from at 2.20% to 2.10%.
By this point, the US 2-year Treasury bond yield had shed 16bps to 4.60%, the 10-year yield had lost 12bps to 4.28% while the 30-year yield finished 7bps lower at 4.49%.
In major euro-zone markets, 10-year bond yields moved broadly in line with their US counterpart.
The “flash” June consumer price index (CPI) report was released on Tuesday. The euro-zone CPI increased by 0.2% over the month and by 2.5% over the year, down from 2.6% in May. Annual core CPI remained steady at 2.9%.
By the end of the week, the German 10-year bund yield had gained 3bps to 2.53% while the French 10-year OAT yield had lost 9bps to 3.16%. The Italian 10-year BTP yield shed 13bps to 3.94% over the week while the British 10-year gilt yield finished 4bps lower at 4.23%.
The AOFM held two vanilla tenders this week. $600 million of April 2037s and $900 million of May 2028s were priced at nominal yields of 4.51% and 4.14% respectively. There were also two Treasury note tenders which raised $2.0 billion on a short-term basis.
The gross value of all bonds issued by the AOFM in the 2024/2025 financial year (not taking into account short-term Treasury note tenders) is $1.50 billion. There are currently $839.35 billion of Treasury bonds and $40.985 billion of Treasury index-linked bonds on issue. The next series to mature does so on 21 November 2024 when $41.30 billion worth of bonds are due. There are also $30.00 billion of short-term Treasury notes outstanding.