Summary: 10-year bond yields up in Australia; ACGB 10-year spread to US Treasury yield falls from -15bps to -17bps; 10-year bond yields up in US, major European markets; $3.95 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 week. By the end of it, the 3-year ACGB yield had gained 10bps to 2.91%, the 10-year yield had added 8bps to 3.30% while the 20-year yield finished 3bps higher at 3.72%. The spread between US and Australian 10-year Treasury bond yields “tightened” from -15bps to -17bps.
Over in the US, 10-year bond yields started the week with a large rise which was followed by smaller increases over the following two days. However, yields then fell back over the latter part of the week.
The Conference Board’s March reading of its Consumer Sentiment Index was released on Tuesday. The index increased and remains above its long-term average.
At the end of the week, the latest report on personal consumption expenditures indicated core PCE price inflation had increased by 0.3% in February and by 4.6% on annual basis, down from 4.7% in January.
The Atlanta Fed’s Nowcast model was also updated. The March quarter GDP growth estimate fell back to 2.5% annualised, or a 0.6% expansion over the quarter.
By this point, the US 2-year Treasury bond yield had gained 24bps to 4.02%, the 10-year yield had added 10bps to 3.47% while the 30-year yield finished unchanged at 3.65%.
In major euro-zone markets, 10-year bond yields followed a similar path to their US counterpart except yields rose on each day except Friday.
Germany’s ifo Institute released the March reading of its business climate index at the start of the week. The index increased for a fifth consecutive month, with firms’ views of current conditions and the short-term outlook both improving.
The latest euro-zone’s Economic Sentiment Indicator (ESI) was released on Thursday. The index slipped a touch further in March but remained close to its long-term average. This indicator has a solid correlation with euro-zone GDP and it implied a year-to-March growth rate of 1.2%, down from 1.3%.
By the end of the week, the German 10-year bond yield had gained 17bps to 2.29% while the French 10-year OAT yield had added 15bps to 2.80%. The Italian 10-year BTP yield increased by 9bps over the week to 4.10% while the British 10-year gilt yield finished 19bps higher at 3.63%.
The AOFM held two vanilla bond tenders as well an index-linked tender during the week. $800 million of May 2034s and $500 million of May 2025s were priced at respective yields of 3.39% and 2.89% while $150 million of November 2027 ILBs were priced at a real yield of 0.43%. There were also three Treasury note tenders which raised a total of $2.5 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 $59.10 billion. There are currently $836.85 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 $31.0 billion of short-term Treasury notes currently outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-23 | 5.50 | 34,200 | 3.61 | 0.21 | 0.02 | 3.61 | 3.37 |
| 21-Apr-24 | 2.75 | 35,900 | 3.13 | 0.05 | -0.61 | 3.16 | 3.08 |
| 21-Nov-24 | 0.25 | 41,300 | 3.06 | 0.10 | -0.60 | 3.10 | 2.92 |
| 21-Apr-25 | 3.25 | 41,500 | 2.95 | 0.09 | -0.65 | 2.99 | 2.81 |
| 21-Nov-25 | 0.25 | 39,200 | 2.91 | 0.09 | -0.68 | 2.96 | 2.77 |
| 21-Apr-26 | 4.25 | 39,100 | 2.94 | 0.09 | -0.66 | 2.98 | 2.80 |
| 21-Sep-26 | 0.50 | 37,800 | 2.95 | 0.09 | -0.67 | 3.00 | 2.82 |
| 21-Apr-27 | 4.75 | 36,700 | 2.98 | 0.08 | -0.66 | 3.03 | 2.85 |
| 21-Nov-27 | 2.75 | 31,400 | 3.02 | 0.09 | -0.64 | 3.06 | 2.88 |
| 21-May-28 | 2.25 | 30,200 | 3.04 | 0.08 | -0.64 | 3.09 | 2.92 |
| 21-Nov-28 | 2.75 | 34,100 | 3.07 | 0.08 | -0.63 | 3.13 | 2.95 |
| 21-Apr-29 | 3.25 | 35,000 | 3.10 | 0.08 | -0.64 | 3.17 | 2.99 |
| 21-Nov-29 | 2.75 | 34,700 | 3.14 | 0.08 | -0.63 | 3.20 | 3.03 |
| 21-May-30 | 2.50 | 37,100 | 3.18 | 0.08 | -0.62 | 3.24 | 3.07 |
| 21-Dec-30 | 1.00 | 38,700 | 3.22 | 0.08 | -0.61 | 3.28 | 3.11 |
| 21-Jun-31 | 1.50 | 38,100 | 3.25 | 0.08 | -0.61 | 3.31 | 3.14 |
| 21-Nov-31 | 1.00 | 21,000 | 3.27 | 0.08 | -0.61 | 3.33 | 3.16 |
| 21-May-32 | 1.25 | 39,300 | 3.28 | 0.08 | -0.61 | 3.34 | 3.18 |
| 21-Nov-32 | 1.75 | 29,000 | 3.30 | 0.08 | -0.61 | 3.35 | 3.19 |
| 21-Apr-33 | 4.50 | 23,600 | 3.30 | 0.08 | -0.61 | 3.36 | 3.19 |
| 21-Nov-33 | 3.00 | 21,100 | 3.32 | 0.08 | -0.61 | 3.38 | 3.22 |
| 21-May-34 | 3.75 | 17,400 | 3.34 | 0.08 | -0.60 | 3.40 | 3.24 |
| 21-Jun-35 | 2.75 | 10,050 | 3.42 | 0.07 | -0.61 | 3.48 | 3.33 |
| 21-Apr-37 | 3.75 | 12,300 | 3.53 | 0.06 | -0.57 | 3.59 | 3.45 |
| 21-Jun-39 | 3.25 | 10,300 | 3.65 | 0.05 | -0.53 | 3.70 | 3.57 |
| 21-May-41 | 2.75 | 13,800 | 3.72 | 0.03 | -0.51 | 3.78 | 3.66 |
| 21-Mar-47 | 3.00 | 14,200 | 3.80 | 0.03 | -0.45 | 3.85 | 3.78 |
| 21-Jun-51 | 1.75 | 19,000 | 3.80 | 0.03 | -0.40 | 3.85 | 3.73 |