Summary: 10-year bond yield down in Australia; ACGB 10-year spread to US Treasury yield falls from -8bps to -12bps; 10-year bond yields up in US, UK, down in major European markets; $2.3 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields increased over the first two days of the week before retreating midweek, falling more noticeably on Thursday and then finishing almost steady at the end of the week. By this point, the 3-year ACGB yield had lost 4bps to 2.94%, the 10-year yield had shed 2bps to 3.32% while the 20-year yield finished 2bps higher at 3.80%. The spread between US and Australian 10-year Treasury bond yields “tightened” from -8bps to -12bps.
Over in the US, 10-year bond yields started the week with a substantial rise which was reversed the following day. Yields dropped again midweek and then retraced over the next two days.
The ISM’s April PMI report was released at the start of the week. The latest reading of the PMI index increased but remained in contractionary territory.
March’s JOLTS report came out the next day and it indicated the US quit rate had slipped while maintaining a historically-high reading. Total quits and opening were down while separations were up.
The FOMC’s two-day meeting ended on Wednesday and another 25bps increase to its target range for the federal funds rate was announced.
The Atlanta Fed’s Nowcast model was updated on Thursday. Its June quarter GDP growth estimate was increased to 2.7% annualised, or a 0.7% expansion over the quarter.
At the end of the week, April’s non-farm payrolls report produced a rise in employment which was greater than expected. The jobless rate ticked down from 3.5% to 3.4% while the participation rate remained unchanged at 62.6%.
By this point, the US 2-year Treasury bond yield had shed 10bps to 3.90%, the 10-year yield had added 2bps to 3.44% while the 30-year yield finished 7bps higher at 3.68%.
In major euro-zone markets, 10-year bond yields took a similar path to US Treasury bonds except Monday was a public holiday and euro-zone yields dropped on Thursday.
The Governing Council of the ECB held its May policy meeting on Thursday. As expected, the ECB raised its three policy rates, all by 25bps. “The inflation outlook continues to be too high for too long.”
By the end of the week, the German 10-year bond yield had lost 2bps to 2.29% while the French 10-year OAT yield had slipped 1bp to 2.88%. The Italian 10-year BTP yield increased by 2bps over the week to 4.20% while the British 10-year gilt yield finished 6bps higher at 3.90%.
The AOFM held just the one bond tender during the week; $800 million April 2033s were priced at a yield of 3.36%. There were also two Treasury note tenders which raised a total of $1.5 billion on a short-term basis.
The gross value of all bonds issued by the AOFM in the 2022/2023 financial year-to-date (not taking into account buy-backs or short-term Treasury note tenders) is $75.60 billion. There are currently $819.05 billion of Treasury bonds and $38.836 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 $39.00 billion of short-term Treasury notes currently outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 3.52 | 0.14 | 0.43 | 3.69 | 3.41 |
| 21-Nov-24 | 0.25 | 41,300 | 3.22 | 0.08 | 0.27 | 3.41 | 3.18 |
| 21-Apr-25 | 3.25 | 41,500 | 3.08 | 0.05 | 0.22 | 3.26 | 3.05 |
| 21-Nov-25 | 0.25 | 39,200 | 2.96 | -0.01 | 0.13 | 3.17 | 2.96 |
| 21-Apr-26 | 4.25 | 39,100 | 2.96 | -0.04 | 0.11 | 3.18 | 2.96 |
| 21-Sep-26 | 0.50 | 37,800 | 2.97 | -0.04 | 0.11 | 3.20 | 2.97 |
| 21-Apr-27 | 4.75 | 36,700 | 2.98 | -0.05 | 0.08 | 3.20 | 2.98 |
| 21-Nov-27 | 2.75 | 31,400 | 3.00 | -0.06 | 0.07 | 3.21 | 3.00 |
| 21-May-28 | 2.25 | 30,200 | 3.02 | -0.06 | 0.06 | 3.23 | 3.02 |
| 21-Nov-28 | 2.75 | 34,100 | 3.05 | -0.06 | 0.06 | 3.24 | 3.05 |
| 21-Apr-29 | 3.25 | 35,800 | 3.09 | -0.04 | 0.07 | 3.27 | 3.09 |
| 21-Nov-29 | 2.75 | 34,700 | 3.14 | -0.04 | 0.08 | 3.31 | 3.13 |
| 21-May-30 | 2.50 | 37,100 | 3.18 | -0.04 | 0.08 | 3.33 | 3.17 |
| 21-Dec-30 | 1.00 | 38,700 | 3.22 | -0.03 | 0.08 | 3.37 | 3.21 |
| 21-Jun-31 | 1.50 | 38,100 | 3.26 | -0.03 | 0.09 | 3.40 | 3.25 |
| 21-Nov-31 | 1.00 | 21,000 | 3.29 | -0.02 | 0.10 | 3.42 | 3.27 |
| 21-May-32 | 1.25 | 39,300 | 3.30 | -0.02 | 0.10 | 3.43 | 3.29 |
| 21-Nov-32 | 1.75 | 29,000 | 3.32 | -0.02 | 0.10 | 3.44 | 3.30 |
| 21-Apr-33 | 4.50 | 24,400 | 3.32 | -0.02 | 0.10 | 3.44 | 3.30 |
| 21-Nov-33 | 3.00 | 21,100 | 3.34 | -0.02 | 0.10 | 3.47 | 3.33 |
| 21-May-34 | 3.75 | 17,400 | 3.36 | -0.02 | 0.10 | 3.48 | 3.35 |
| 21-Dec-34 | 3.50 | 14,000 | 3.40 | -0.02 | 3.40 | 3.52 | 3.39 |
| 21-Jun-35 | 2.75 | 10,850 | 3.45 | -0.02 | 0.09 | 3.56 | 3.43 |
| 21-Apr-37 | 3.75 | 12,300 | 3.58 | 0.00 | 0.11 | 3.68 | 3.56 |
| 21-Jun-39 | 3.25 | 10,300 | 3.71 | 0.01 | 0.11 | 3.79 | 3.69 |
| 21-May-41 | 2.75 | 13,800 | 3.79 | 0.00 | 0.10 | 3.87 | 3.78 |
| 21-Mar-47 | 3.00 | 14,200 | 3.86 | 0.02 | 0.09 | 3.93 | 3.85 |
| 21-Jun-51 | 1.75 | 19,000 | 3.87 | 0.02 | 0.10 | 3.93 | 3.86 |