Summary: Bond yields mostly lower in Australia; ACGB 10-year spread to US Treasury yield falls from -16bps to -22bps; 10-year bond yields up a touch in US, down in major European markets; AOFM issues $4.1 billion worth of bonds, notes.
Locally, long-term ACGB yields rose noticeably on Monday before falling back over the next three days with Thursday’s fall matching Monday’s rise. Friday was a quiet day with little change. By this point, the 3-year ACGB yield had added 3bps to 3.24%, the 10-year yield had lost 5bps to 3.61% while the 20-year yield finished 6bps lower at 4.05%. The spread between US and Australian 10-year Treasury bond yields “tightened” from -16bps to -22bps.
Over in the US, 10-year bond yields rose moderately on Monday but then fell over the next two days before rising again over the remainder of the week.
October producer price indices were released on Tuesday. Prices increased by just 0.2%. over the month, less than half the expected figure but were still up by 8.0% over the year.
Industrial production numbers for October were released the next day. Production contracted by 0.1%, in contrast with the expected 0.2% increase. This latest reading implied an annual GDP growth rate of 3.3%.
October’s retail sales report was released that same morning and it indicated total sales rose by 1.3% over the month, greater than the expected 0.9% increase. Higher fuel sales had the largest single effect on the total.
The Atlanta Fed’s Nowcast model was updated on Thursday. The December quarter GDP growth estimate was raised to 4.2% annualised, or a 1.0% expansion over the quarter.
The Conference Board’s October reading of its Leading Index came out at the end of the week. The figure again undershot expectations and it marks an eighth consecutive monthly fall.
By this point, the US 2-year Treasury bond yield had jumped by 19bps to 4.51%, the 10-year yield had inched up 1bp to 3.83% while the 30-year yield finished 14bps lower at 3.92%.
In major euro-zone markets, 10-year bond yields followed broadly similar paths to their US counterpart, except the rises towards the end of the week were modest instead of substantial.
There was little of note in terms of economic reports except for the latest induction production figures released at the start of the week. Output expanded by 0.9% in September, more than expected but less than half August’s 2.0% rise.
By the end of the week, the German 10-year bund yield had fallen by 14bps to 2.01% and the French 10-year OAT yield had lost 19bps to 2.48%. The Italian 10-year BTP yield shed 32bps to 3.89% while the British 10-year gilt yield finished 11bps lower at 3.24%.
The AOFM held two bond tenders during the week. $900 million of November 2033 and $700 million of November 2029s were priced at yields of 3.73% and 3.53% 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 $41.50 billion. There are currently $846.55 billion of Treasury bonds and $37.936 billion of Treasury index-linked bonds on issue. The next series to mature does so on 21 November when $26.50 billion worth of bonds are due. There are also $29.00 billion of short-term Treasury notes currently outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-23 | 5.50 | 34,200 | 3.11 | 0.00 | 0.04 | 3.14 | 3.10 |
| 21-Apr-24 | 2.75 | 35,900 | 3.11 | 0.04 | -0.07 | 3.16 | 3.11 |
| 21-Nov-24 | 0.25 | 41,300 | 3.12 | 0.04 | -0.27 | 3.19 | 3.11 |
| 21-Apr-25 | 3.25 | 40,800 | 3.14 | 0.02 | -0.32 | 3.23 | 3.12 |
| 21-Nov-25 | 0.25 | 38,000 | 3.20 | 0.04 | -0.34 | 3.28 | 3.18 |
| 21-Apr-26 | 4.25 | 38,100 | 3.25 | 0.04 | -0.33 | 3.33 | 3.23 |
| 21-Sep-26 | 0.50 | 36,700 | 3.29 | 0.04 | -0.33 | 3.37 | 3.27 |
| 21-Apr-27 | 4.75 | 36,700 | 3.31 | 0.03 | -0.33 | 3.41 | 3.30 |
| 21-Nov-27 | 2.75 | 31,400 | 3.35 | 0.02 | -0.35 | 3.45 | 3.34 |
| 21-May-28 | 2.25 | 29,700 | 3.39 | 0.02 | -0.36 | 3.50 | 3.38 |
| 21-Nov-28 | 2.75 | 34,100 | 3.41 | 0.00 | -0.38 | 3.53 | 3.41 |
| 21-Apr-29 | 3.25 | 34,500 | 3.44 | 0.00 | -0.38 | 3.56 | 3.44 |
| 21-Nov-29 | 2.75 | 34,100 | 3.48 | -0.01 | -0.38 | 3.61 | 3.48 |
| 21-May-30 | 2.50 | 37,100 | 3.52 | -0.02 | -0.39 | 3.64 | 3.51 |
| 21-Dec-30 | 1.00 | 38,700 | 3.56 | -0.03 | -0.40 | 3.70 | 3.56 |
| 21-Jun-31 | 1.50 | 38,100 | 3.58 | -0.03 | -0.40 | 3.72 | 3.58 |
| 21-Nov-31 | 1.00 | 21,000 | 3.59 | -0.04 | -0.40 | 3.74 | 3.59 |
| 21-May-32 | 1.25 | 38,400 | 3.59 | -0.04 | -0.40 | 3.75 | 3.59 |
| 21-Nov-32 | 1.75 | 27,800 | 3.61 | -0.04 | -0.40 | 3.76 | 3.61 |
| 21-Apr-33 | 4.50 | 22,200 | 3.61 | -0.04 | -0.40 | 3.76 | 3.61 |
| 21-Nov-33 | 3.00 | 18,500 | 3.65 | -0.05 | -0.40 | 3.81 | 3.65 |
| 21-Jun-35 | 2.75 | 9,550 | 3.77 | -0.06 | -0.38 | 3.94 | 3.77 |
| 21-Apr-37 | 3.75 | 12,300 | 3.88 | -0.06 | -0.34 | 4.04 | 3.88 |
| 21-Jun-39 | 3.25 | 10,300 | 3.99 | -0.06 | -0.29 | 4.14 | 3.99 |
| 21-May-41 | 2.75 | 13,500 | 4.06 | -0.06 | -0.26 | 4.21 | 4.06 |
| 21-Mar-47 | 3.00 | 13,600 | 4.07 | -0.06 | -0.24 | 4.22 | 4.07 |
| 21-Jun-51 | 1.75 | 18,700 | 4.03 | -0.06 | -0.24 | 4.19 | 4.03 |