Summary: Bond yields lower in Australia; ACGB 10-year spread to US Treasury yield fall from -10bps to -28bps; 10-year bond yields up in US, major European markets; AOFM issues $3.6 billion worth of bonds, notes.
Locally, long-term ACGB yields see-sawed through the week but the falls were larger in magnitude than the rises. By the end of the week, the 3-year ACGB yield had slipped 1bp to 3.03%, the 10-year yield had lost 9bps to 3.30% while the 20-year yield finished 16bps lower at 3.61%. The spread between US and Australian 10-year Treasury bond yields “tightened” from -10bps to -28bps.
Over in the US, 10-year bond yields started the week with a sizable rise. Falls occurred over the following two days which were then reversed during the remainder of the week.
At the start of the week, the ISM’s services activity index rose from 54.4 to 56.5 in November.
There was then not much in the way of notable reports until the end of the week when producer price indices and consumer sentiment indices were released.
November producer prices increased by 0.3% over the month, more than expected and up by 7.4% over the year.
The University of Michigan’s Consumer sentiment index rose in December but remained well below its long-term average.
The Atlanta Fed’s Nowcast model was also updated. The December quarter GDP growth estimate was raised to 3.2% annualised, or a 0.8% expansion over the quarter.
By this point, the US 2-year Treasury bond yield had gained 7bps to 4.36%, the 10-year yield had gained 9bps to 3.58% while the 30-year yield finished just 1bp higher at 3.56%.
In major euro-zone markets, 10-year bond yields followed a similar pattern to their US counterpart.
There was little of note during the week and by the end of the week the German 10-year bund yield had added 8bps to 1.93% and the French 10-year OAT yield had gained 9bps to 2.39%. The Italian 10-year BTP yield added 3bps over the week to 3.80% while the British 10-year gilt yield finished 3bps higher at 3.18%.
The AOFM held two bond tenders during the week. $900 million of November 2033s and $700 million of November 2025s were priced at yields of 3.39% and 3.05% respectively. There were also two 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 $46.45 billion. There are currently $824.85 billion of Treasury bonds and $38.086 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 | 3.06 | -0.06 | -0.07 | 3.11 | 3.06 |
| 21-Apr-24 | 2.75 | 35,900 | 3.01 | -0.25 | -0.13 | 3.16 | 3.01 |
| 21-Nov-24 | 0.25 | 41,300 | 3.00 | -0.22 | -0.22 | 3.18 | 3.00 |
| 21-Apr-25 | 3.25 | 41,500 | 2.99 | -0.28 | -0.24 | 3.17 | 2.99 |
| 21-Nov-25 | 0.25 | 38,700 | 3.02 | -0.28 | -0.26 | 3.23 | 3.02 |
| 21-Apr-26 | 4.25 | 38,100 | 3.05 | -0.28 | -0.26 | 3.26 | 3.05 |
| 21-Sep-26 | 0.50 | 37,300 | 3.08 | -0.27 | -0.27 | 3.29 | 3.08 |
| 21-Apr-27 | 4.75 | 36,700 | 3.10 | -0.26 | -0.27 | 3.32 | 3.10 |
| 21-Nov-27 | 2.75 | 31,400 | 3.14 | -0.25 | -0.30 | 3.35 | 3.14 |
| 21-May-28 | 2.25 | 29,700 | 3.16 | -0.24 | -0.31 | 3.38 | 3.16 |
| 21-Nov-28 | 2.75 | 34,100 | 3.19 | -0.23 | -0.32 | 3.42 | 3.19 |
| 21-Apr-29 | 3.25 | 34,500 | 3.22 | -0.22 | -0.33 | 3.44 | 3.22 |
| 21-Nov-29 | 2.75 | 34,100 | 3.26 | -0.21 | -0.34 | 3.48 | 3.26 |
| 21-May-30 | 2.50 | 37,100 | 3.29 | -0.20 | -0.34 | 3.51 | 3.29 |
| 21-Dec-30 | 1.00 | 38,700 | 3.33 | -0.20 | -0.34 | 3.55 | 3.33 |
| 21-Jun-31 | 1.50 | 38,100 | 3.35 | -0.20 | -0.34 | 3.57 | 3.35 |
| 21-Nov-31 | 1.00 | 21,000 | 3.37 | -0.21 | -0.34 | 3.58 | 3.37 |
| 21-May-32 | 1.25 | 39,300 | 3.38 | -0.23 | -0.35 | 3.59 | 3.38 |
| 21-Nov-32 | 1.75 | 27,800 | 3.39 | -0.24 | -0.34 | 3.60 | 3.39 |
| 21-Apr-33 | 4.50 | 22,900 | 3.39 | -0.23 | -0.35 | 3.61 | 3.39 |
| 21-Nov-33 | 3.00 | 19,400 | 3.42 | -0.24 | -0.36 | 3.64 | 3.42 |
| 21-Jun-35 | 2.75 | 9,550 | 3.54 | -0.19 | -0.35 | 3.76 | 3.54 |
| 21-Apr-37 | 3.75 | 12,300 | 3.64 | -0.14 | -0.32 | 3.86 | 3.64 |
| 21-Jun-39 | 3.25 | 10,300 | 3.73 | -0.11 | -0.30 | 3.95 | 3.73 |
| 21-May-41 | 2.75 | 13,500 | 3.79 | -0.10 | -0.30 | 4.01 | 3.79 |
| 21-Mar-47 | 3.00 | 13,900 | 3.80 | -0.17 | -0.30 | 4.02 | 3.80 |
| 21-Jun-51 | 1.75 | 18,700 | 3.76 | -0.28 | -0.30 | 3.98 | 3.76 |