Summary: 10-year bond yield down in Australia; ACGB 10-year spread to US Treasury yield falls to -7bps; 10-year bond yields down in US, UK, major European markets; $2.85 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields increased moderately at the start of the week, then paused before falling noticeably on Wednesday and Thursday. Yield rose moderately again at the end of the week. By this point, the 3-year ACGB yield had lost 4bps to 3.85% while 10-year and 20-year yields both finished 7bps lower at 4.16% and 4.49% respectively. The spread between US and Australian 10-year Treasury bond yields decreased from -2bps to -7bps.
Over in the US, 10-year bond yields also started the week with a significant rise, a pause and then a large fall in the first three days of the week. Yields then rose moderately on Thursday before easing a touch at the end of the week.
There were little in the way of significant data releases in the US and an update of the Atlanta Fed’s Nowcast model at the start of the week was pretty much all there was. The September quarter GDP growth estimate was raised to 5.9% annualised, or a 1.4% expansion over the quarter.
S&P Global Market Intelligence’s latest flash reading of its composite index was released midweek, with the index declining from July’s final reading of 52.0 to 50.4. The manufacturing index fell from 49.0 to 47.0 and the services index lost 1.3 to 51.3. S&P Global’s Chris Williamson said, “A near-stalling of business activity in August raises doubts over the strength of US economic growth in the third quarter.”
By the end of the week, the US 2-year Treasury bond yield had gained 14bps to 5.08%, the 10-year yield had lost 2bps to 4.23% while the 30-year yield finished 9bps lower at 4.29%.
In major euro-zone markets, 10-year bond yields moved broadly in line with US yields over the week.
S&P Global Market Intelligence released its August flash PMI figures for the euro-zone some hours before the US figures on Wednesday. The preliminary reading of the composite index was 47.0, down from July’s final reading of 48.6.
Germany’s ifo Institute released the August reading of its business climate index at the end of the week. The index fell for a fourth consecutive month, as firms’ views of current conditions and their collective outlook both deteriorated again.
By the end of the week, the German 10-year bund yield had lost 6bps to 2.56% and the French 10-year OAT yield had shed 8bps to 3.08%. The Italian 10-year BTP yield decreased by 9bps over the week to 4.23% while the British 10-year gilt yield finished 24bps lower at 4.53%.
The AOFM held an index-linked bond (ILB) tender this week as well as the usual vanilla bond tender. $150 million of August 2035 ILBs were priced at a real yield of 1.86% while $700 million of November 2033s were priced at a nominal yield of 4.22%. 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 2023/2024 financial year (not taking into account buy-backs or short-term Treasury note tenders) is $5.95 billion. There are currently $829.35 billion of Treasury bonds and $39.886 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 $27.50 billion of short-term Treasury notes outstanding after $4.50 billion matured on Friday.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.05 | -0.02 | -0.15 | 4.05 | 4.01 |
| 21-Nov-24 | 0.25 | 41,300 | 4.03 | -0.01 | -0.16 | 4.04 | 3.98 |
| 21-Apr-25 | 3.25 | 41,500 | 3.94 | -0.03 | -0.16 | 3.98 | 3.89 |
| 21-Nov-25 | 0.25 | 39,200 | 3.88 | -0.04 | -0.13 | 3.93 | 3.83 |
| 21-Apr-26 | 4.25 | 39,600 | 3.86 | -0.04 | -0.12 | 3.91 | 3.81 |
| 21-Sep-26 | 0.50 | 37,800 | 3.85 | -0.04 | -0.10 | 3.90 | 3.81 |
| 21-Apr-27 | 4.75 | 36,700 | 3.86 | -0.04 | -0.06 | 3.91 | 3.81 |
| 21-Nov-27 | 2.75 | 31,400 | 3.87 | -0.04 | -0.03 | 3.93 | 3.82 |
| 21-May-28 | 2.25 | 30,900 | 3.88 | -0.05 | 0.00 | 3.96 | 3.84 |
| 21-Nov-28 | 2.75 | 34,100 | 3.91 | -0.05 | 0.02 | 3.99 | 3.86 |
| 21-Apr-29 | 3.25 | 36,600 | 3.94 | -0.06 | 0.02 | 4.03 | 3.89 |
| 21-Nov-29 | 2.75 | 34,700 | 3.97 | -0.07 | 0.04 | 4.07 | 3.93 |
| 21-May-30 | 2.50 | 37,100 | 4.01 | -0.07 | 0.06 | 4.11 | 3.96 |
| 21-Dec-30 | 1.00 | 38,700 | 4.05 | -0.07 | 0.09 | 4.15 | 4.01 |
| 21-Jun-31 | 1.50 | 38,100 | 4.08 | -0.07 | 0.11 | 4.18 | 4.04 |
| 21-Nov-31 | 1.00 | 21,000 | 4.10 | -0.07 | 0.11 | 4.21 | 4.06 |
| 21-May-32 | 1.25 | 39,300 | 4.13 | -0.07 | 0.13 | 4.23 | 4.08 |
| 21-Nov-32 | 1.75 | 29,000 | 4.14 | -0.07 | 0.14 | 4.25 | 4.10 |
| 21-Apr-33 | 4.50 | 25,100 | 4.14 | -0.07 | 0.14 | 4.25 | 4.10 |
| 21-Nov-33 | 3.00 | 22,500 | 4.16 | -0.07 | 0.15 | 4.27 | 4.11 |
| 21-May-34 | 3.75 | 18,800 | 4.17 | -0.07 | 0.16 | 4.28 | 4.13 |
| 21-Dec-34 | 3.50 | 16,300 | 4.20 | -0.07 | 0.17 | 4.31 | 4.15 |
| 21-Jun-35 | 2.75 | 12,250 | 4.22 | -0.07 | 0.17 | 4.33 | 4.18 |
| 21-Apr-37 | 3.75 | 12,300 | 4.32 | -0.07 | 0.19 | 4.43 | 4.27 |
| 21-Jun-39 | 3.25 | 10,300 | 4.41 | -0.07 | 0.20 | 4.52 | 4.36 |
| 21-May-41 | 2.75 | 14,300 | 4.47 | -0.07 | 0.20 | 4.59 | 4.43 |
| 21-Mar-47 | 3.00 | 14,200 | 4.52 | -0.07 | 0.22 | 4.64 | 4.48 |
| 21-Jun-51 | 1.75 | 19,600 | 4.53 | -0.07 | 0.24 | 4.65 | 4.49 |