Summary: 10-year bond yield down in Australia; ACGB 10-year spread to US Treasury yield falls from -17bps to -22bps; 10-year bond yields down in US, major European markets; $2.8 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields started the week with a modest fall and then proceeded to see-saw over the remainder of the shortened week. However, the down days outweighed the up days and, by the end of the week, the 3-year ACGB yield had shed 13bps to 2.78%, the 10-year yield had lost 12bps to 3.18% while the 20-year yield finished 8bps lower at 3.64%. The spread between US and Australian 10-year Treasury bond yields “tightened” from -17bps to -22bps.
Over in the US, 10-year bond yields started the week with a moderate fall which was followed by more falls over the following two days. Yields then stabilised on Thursday and increased noticeably on Friday.
The ISM’s March PMI report was released at the start of the week. The latest reading of the PMI index declined, remaining in contractionary territory.
February’s JOLTS report came out the next day and it indicated the US quit rate ticked up from 2.5% to 2.6%. Total quits were up while separations and openings were down.
The ISM’s March Services PMI came out midweek. The index fell from 55.1 to 51.2, below the generally expected figure of 54.4.
The Atlanta Fed’s Nowcast model was also updated. The March quarter GDP growth estimate decreased to 1.5% annualised, or a 0.4% expansion over the quarter.
At the end of the week, March’s non-farm payrolls report produced a rise in employment which was essentially in line with expectations. The jobless rate ticked down from 3.6% to 3.5% as the participation rate ticked up from 62.5% to 62.6%.
By this point, the US 2-year Treasury bond yield had lost 6bps to 3.96%, the 10-year yield had shed 7bps to 3.40% while the 30-year yield finished 3bps lower at 3.62%.
In major euro-zone markets, 10-year bond yields fell through the week with the exception of Tuesday when yields rose and Friday when European markets were closed.
By the end of the week, the German 10-year bond yield had lost 11bps to 2.18% while the French 10-year OAT yield had shed 10bps to 2.70%. The Italian 10-year BTP yield decreased by 8bps over the week to 4.02% while the British 10-year gilt yield finished 7bps lower at 3.56%.
The AOFM held just the one bond tender during the week. $800 million of November 2033s were priced at a yield of 3.61%. There were also three Treasury note tenders which raised a total of $2.0 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 $59.90 billion. There are currently $837.65 billion of Treasury bonds and $38.736 billion of Treasury index-linked bonds on issue. The next series to mature does so on 21 April 2023 when $34.20 billion worth of bonds are due. There are also $33.0 billion of short-term Treasury notes currently outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-23 | 5.50 | 34,200 | 3.42 | -0.19 | -0.17 | 3.55 | 3.42 |
| 21-Apr-24 | 2.75 | 35,900 | 3.11 | -0.03 | -0.45 | 3.17 | 3.11 |
| 21-Nov-24 | 0.25 | 41,300 | 2.93 | -0.13 | -0.51 | 3.10 | 2.93 |
| 21-Apr-25 | 3.25 | 41,500 | 2.83 | -0.13 | -0.54 | 2.99 | 2.83 |
| 21-Nov-25 | 0.25 | 39,200 | 2.79 | -0.12 | -0.54 | 2.95 | 2.79 |
| 21-Apr-26 | 4.25 | 39,100 | 2.82 | -0.12 | -0.52 | 2.98 | 2.82 |
| 21-Sep-26 | 0.50 | 37,800 | 2.83 | -0.12 | -0.53 | 2.99 | 2.83 |
| 21-Apr-27 | 4.75 | 36,700 | 2.86 | -0.12 | -0.51 | 3.02 | 2.86 |
| 21-Nov-27 | 2.75 | 31,400 | 2.88 | -0.13 | -0.50 | 3.05 | 2.88 |
| 21-May-28 | 2.25 | 30,200 | 2.91 | -0.14 | -0.49 | 3.07 | 2.91 |
| 21-Nov-28 | 2.75 | 34,100 | 2.94 | -0.14 | -0.48 | 3.10 | 2.94 |
| 21-Apr-29 | 3.25 | 35,000 | 2.98 | -0.11 | -0.44 | 3.13 | 2.98 |
| 21-Nov-29 | 2.75 | 34,700 | 3.03 | -0.11 | -0.44 | 3.17 | 3.03 |
| 21-May-30 | 2.50 | 37,100 | 3.07 | -0.11 | -0.43 | 3.21 | 3.07 |
| 21-Dec-30 | 1.00 | 38,700 | 3.11 | -0.12 | -0.42 | 3.25 | 3.11 |
| 21-Jun-31 | 1.50 | 38,100 | 3.13 | -0.12 | -0.42 | 3.27 | 3.13 |
| 21-Nov-31 | 1.00 | 21,000 | 3.15 | -0.12 | -0.41 | 3.29 | 3.15 |
| 21-May-32 | 1.25 | 39,300 | 3.17 | -0.12 | -0.41 | 3.31 | 3.17 |
| 21-Nov-32 | 1.75 | 29,000 | 3.18 | -0.11 | -0.40 | 3.32 | 3.18 |
| 21-Apr-33 | 4.50 | 23,600 | 3.18 | -0.11 | -0.40 | 3.32 | 3.18 |
| 21-Nov-33 | 3.00 | 21,100 | 3.21 | -0.11 | -0.40 | 3.35 | 3.21 |
| 21-May-34 | 3.75 | 17,400 | 3.23 | -0.11 | -0.40 | 3.37 | 3.23 |
| 21-Jun-35 | 2.75 | 10,850 | 3.32 | -0.10 | -0.39 | 3.45 | 3.32 |
| 21-Apr-37 | 3.75 | 12,300 | 3.43 | -0.10 | -0.36 | 3.56 | 3.43 |
| 21-Jun-39 | 3.25 | 10,300 | 3.55 | -0.09 | -0.34 | 3.67 | 3.55 |
| 21-May-41 | 2.75 | 13,800 | 3.64 | -0.08 | -0.32 | 3.74 | 3.64 |
| 21-Mar-47 | 3.00 | 14,200 | 3.73 | -0.07 | -0.27 | 3.82 | 3.73 |
| 21-Jun-51 | 1.75 | 19,000 | 3.73 | -0.07 | -0.23 | 3.83 | 3.73 |