Summary: Bond yields lower in Australia; ACGB 10-year spread to US Treasury yield rises from -11bps to -10bps; 10-year bond yields down in US, most major European markets; AOFM issues $4.1 billion worth of bonds, notes.
Locally, long-term ACGB yields fell through the week wtih the exception of Tuesday. By the end of the week, the 3-year ACGB yield had shed 24bps to 3.04% while 10-year and 20-year yields each finished 19bps lower at 3.39% and 3.77% respectively. The spread between US and Australian 10-year Treasury bond yields “widened” from -11bps to -10bps.
Over in the US, 10-year bond yields started the week sedately enough, rose moderately on Tuesday and then fell over the remainder of the week.
The Conference Board’s November reading of its Consumer Sentiment Index was released on Tuesday. The index fell but still remained above its long-term average.
October’s JOLTS report came out a day later and it indicated the US quit rate declined from 2.7% to 2.6%. Quits and openings declined while separations increased.
On Thursday, the latest report on personal consumption expenditures indicated core PCE price inflation had increased by 0.2% in October and by 5.0% on annual basis, down from 5.2% in September.
The ISM’s November Manufacturing PMI report was also released. The latest reading fell again, this time below 50.0% and into contractionary territory.
The Atlanta Fed’s Nowcast model was also updated. The December quarter GDP growth estimate was lowered to 2.8% annualised, or a 0.7% expansion over the quarter.
At the end of the week, November’s non-farm payrolls report produced another rise in employment which exceeded expectations. The jobless rate remained at 3.7% while the participation rate slipped from 62.2% to 62.1%.
By this point, the US 2-year Treasury bond yield had lost shed 19bps to to 4.29%, the 10-year yield had lost 20bps to 3.49% while the 30-year yield finished 19bps lower at 3.55%.
In major euro-zone markets, 10-year bond yields see-sawed through the week but the falls were larger in magnitude than the rises.
The latest euro-zone’s Economic Sentiment Indicator (ESI) was released on Tuesday. It posted its first rise since February but remained well below the long-term average. This indicator has a solid correlation with euro-zone GDP and it implied a year-to-November growth rate of zero, up from -0.2%.
The “flash” November consumer price index (CPI) report was released a day later. It produced an annual inflation rate of 10.0% in the euro-zone, a little lower than the expected 10.4% as well as October’s final reading of 10.6%. Core annual CPI remained unchanged at 5.0%.
By the end of the week, the German 10-year bund yield had lost 12bps to 1.85% and the French 10-year OAT yield had shed 13bps to 2.30%. The Italian 10-year BTP yield fell 8bps over the week to 3.77% while the British 10-year gilt yield finished 3bps higher at 3.15%.
The AOFM held three vanilla bond tenders during the week. $300 million of March 2047s, $700 million of April 2033s and $600 million of September 2026s were priced at yields of 4.00%, 3.62% and 3.06% respectively. 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 $44.85 billion. There are currently $823.25 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 $29.50 billion of short-term Treasury notes currently outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($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 | 38,000 | 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 | 18,500 | 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 |