Summary: Bond yields lower in Australia; ACGB 10-year spread to US Treasury yield falls from 28bps to 11bps; 10-year bond yields down in US, major European markets; AOFM issues $3 billion worth of notes.
Locally, long-term ACGB yields either fell substantially or remained steady each day. By the end of the week, the 3-year ACGB yield had shed 28bps to 3.24%, the 10-year yield had lost 23bps to 3.61% while the 20-year yield finished 19bps lower at 3.97%. The spread between US and Australian 10-year Treasury bond yields tightened from +28bps to +11bps.
Over in the US, 10-year bond yields started the week with a modest decline before rising noticeably the next day. Sizable falls took place over the next two days before rising moderately at the end of the week.
The Atlanta Fed’s Nowcast model was updated on Tuesday. The December quarter GDP growth estimate was raised to 4.1% annualised, or a 1.0% expansion over the quarter.
December’s CPI report was released on Thursday night (AEDT) and it produced a slightly lower-than-expected 0.1% decline. The annual inflation rate slowed from 7.1% to 6.4% and the core inflation rate slowed from 6.0% to 5.7%.
The latest reading of one of the two major measures of US consumer sentiment, the University of Michigan’s Consumer sentiment index, was published at the end of the week. The index fell back, dropping from December’s final reading of 59.7 to 64.6, still well below its long-term average.
By this point, US 2-year and 10-year Treasury bond yields had both lost 6bps to 4.22% and 3.50% respectively while the 30-year yield finished 8bps lower at 3.61%.
In major euro-zone markets, 10-year bond yields followed a broadly similar pattern to their US counterpart.
There was little of note in terms of economic reports except for the latest industrial production figures released at the end of the week. Output expanded by 0.9% in November, double the expected growth figure and in contrast to October’s 1.9% fall.
By this point the German 10-year bund yield had lost 7bps to 2.14% and the French 10-year OAT yield had shed 11bps to 2.61%. The Italian 10-year BTP yield fell 23bps over the week to 3.98% while the British 10-year gilt yield finished 10bps lower at 3.37%.
The AOFM did not hold any bond tenders during the week. However, there were three Treasury note tenders which raised a total of $3.0 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 $46.60 billion. There are currently $824.85 billion of Treasury bonds and $38.236 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 $31.50 billion of short-term Treasury notes currently outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-23 | 5.50 | 34,200 | 3.22 | -0.01 | 0.09 | 3.25 | 3.22 |
| 21-Apr-24 | 2.75 | 35,900 | 3.19 | -0.16 | 0.12 | 3.29 | 3.19 |
| 21-Nov-24 | 0.25 | 41,300 | 3.17 | -0.20 | 0.13 | 3.27 | 3.16 |
| 21-Apr-25 | 3.25 | 41,500 | 3.15 | -0.25 | 0.17 | 3.29 | 3.15 |
| 21-Nov-25 | 0.25 | 38,700 | 3.19 | -0.26 | 0.17 | 3.32 | 3.19 |
| 21-Apr-26 | 4.25 | 38,100 | 3.21 | -0.26 | 0.17 | 3.34 | 3.21 |
| 21-Sep-26 | 0.50 | 37,300 | 3.25 | -0.27 | 0.18 | 3.39 | 3.25 |
| 21-Apr-27 | 4.75 | 36,700 | 3.28 | -0.27 | 0.19 | 3.41 | 3.28 |
| 21-Nov-27 | 2.75 | 31,400 | 3.31 | -0.26 | 0.20 | 3.45 | 3.31 |
| 21-May-28 | 2.25 | 29,700 | 3.34 | -0.26 | 0.20 | 3.48 | 3.34 |
| 21-Nov-28 | 2.75 | 34,100 | 3.37 | -0.26 | 0.22 | 3.52 | 3.37 |
| 21-Apr-29 | 3.25 | 34,500 | 3.40 | -0.26 | 0.23 | 3.55 | 3.40 |
| 21-Nov-29 | 2.75 | 34,100 | 3.45 | -0.25 | 0.25 | 3.59 | 3.45 |
| 21-May-30 | 2.50 | 37,100 | 3.49 | -0.24 | 0.27 | 3.62 | 3.49 |
| 21-Dec-30 | 1.00 | 38,700 | 3.54 | -0.24 | 0.28 | 3.67 | 3.54 |
| 21-Jun-31 | 1.50 | 38,100 | 3.55 | -0.24 | 0.28 | 3.68 | 3.55 |
| 21-Nov-31 | 1.00 | 21,000 | 3.57 | -0.23 | 0.29 | 3.70 | 3.57 |
| 21-May-32 | 1.25 | 39,300 | 3.58 | -0.23 | 0.30 | 3.71 | 3.58 |
| 21-Nov-32 | 1.75 | 27,800 | 3.59 | -0.23 | 0.30 | 3.72 | 3.59 |
| 21-Apr-33 | 4.50 | 22,900 | 3.59 | -0.23 | 0.30 | 3.72 | 3.59 |
| 21-Nov-33 | 3.00 | 19,400 | 3.63 | -0.23 | 0.30 | 3.76 | 3.63 |
| 21-Jun-35 | 2.75 | 9,550 | 3.74 | -0.23 | 0.30 | 3.88 | 3.74 |
| 21-Apr-37 | 3.75 | 12,300 | 3.83 | -0.21 | 0.32 | 3.96 | 3.83 |
| 21-Jun-39 | 3.25 | 10,300 | 3.92 | -0.20 | 0.33 | 4.05 | 3.92 |
| 21-May-41 | 2.75 | 13,500 | 3.97 | -0.19 | 0.35 | 4.10 | 3.97 |
| 21-Mar-47 | 3.00 | 13,900 | 3.99 | -0.18 | 0.35 | 4.10 | 3.98 |
| 21-Jun-51 | 1.75 | 18,700 | 3.93 | -0.18 | 0.33 | 4.05 | 3.92 |