Summary: Bond yields lower in Australia; ACGB 10-year spread to US Treasury yield rises from -30bps to -16bps; 10-year bond yields down in US, major European markets; AOFM issues $16.15 billion worth of bonds, notes.
Locally, long-term ACGB yields rose noticeably on Monday and Tuesday only to drop back by even more over the remainder of the week. By the end of it, the 3-year ACGB yield had lost 19bps to 3.21%, the 10-year yield had shed 20bps to 3.66% while the 20-year yield finished 10bps lower at 4.11%. The spread between US and Australian 10-year Treasury bond yields “widened” from -30bps to -16bps.
Over in the US, 10-year bond yields rose on Monday but then fell through the remainder of the shortened week.
The Atlanta Fed’s Nowcast model was updated on Wednesday. The December quarter GDP growth estimate was raised to 4.0% annualised, or a 1.0% expansion over the quarter.
October’s CPI report was released on Thursday night (AEDT) and it produced a lower-than-expected 0.4% increase. The annual inflation rate slowed from 8.2% to 7.8% while the core inflation rate slowed from 6.7% to 6.3%.
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 October’s final reading of 59.9 to 54.7, well below its long-term average.
By this point, the US 2-year Treasury bond yield had dropped by 37bps to 4.32%, the 10-year yield had shed 34bps to 3.82% while the 30-year yield finished 19bps lower at 4.06%.
In major euro-zone markets, 10-year bond yields followed broadly similar paths to their US counterpart, except for the rises of euro-zone yields at the end of the week.
By the end of the week, the German 10-year bund yield had fallen by 15bps to 2.15 and the French 10-year OAT yield had lost 16bps to 2.67%. The Italian 10-year BTP yield shed 24bps to 4.21% while the British 10-year gilt yield finished 18bps lower at 3.35%.
The AOFM held just the one indexed-link bond (ILB) tender during the week but it also offered a new bond via a syndicated process on the same day. $150 million of November 2032 ILBs were priced at a real yield of 1.63% and $14 billion worth of May 2034s were priced at 4.145%. There were also three 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 $39.90 billion. There are currently $844.95 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 $26.50 billion of short-term Treasury notes currently outstanding after $4.50 billion matured on Friday.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 3.07 | -0.22 | -0.01 | 3.29 | 3.07 |
| 21-Nov-24 | 0.25 | 41,300 | 3.08 | -0.30 | -0.19 | 3.41 | 3.08 |
| 21-Apr-25 | 3.25 | 40,800 | 3.12 | -0.29 | -0.22 | 3.44 | 3.12 |
| 21-Nov-25 | 0.25 | 38,000 | 3.16 | -0.30 | -0.26 | 3.51 | 3.16 |
| 21-Apr-26 | 4.25 | 38,100 | 3.21 | -0.28 | -0.25 | 3.54 | 3.21 |
| 21-Sep-26 | 0.50 | 36,700 | 3.25 | -0.28 | -0.24 | 3.59 | 3.25 |
| 21-Apr-27 | 4.75 | 36,700 | 3.28 | -0.28 | -0.24 | 3.63 | 3.28 |
| 21-Nov-27 | 2.75 | 31,400 | 3.34 | -0.29 | -0.23 | 3.70 | 3.34 |
| 21-May-28 | 2.25 | 29,700 | 3.37 | -0.29 | -0.24 | 3.74 | 3.37 |
| 21-Nov-28 | 2.75 | 34,100 | 3.41 | -0.29 | -0.23 | 3.78 | 3.41 |
| 21-Apr-29 | 3.25 | 34,500 | 3.45 | -0.29 | -0.23 | 3.82 | 3.45 |
| 21-Nov-29 | 2.75 | 33,400 | 3.49 | -0.29 | -0.23 | 3.86 | 3.49 |
| 21-May-30 | 2.50 | 37,100 | 3.53 | -0.28 | -0.22 | 3.91 | 3.53 |
| 21-Dec-30 | 1.00 | 38,700 | 3.59 | -0.27 | -0.21 | 3.96 | 3.59 |
| 21-Jun-31 | 1.50 | 38,100 | 3.61 | -0.27 | -0.21 | 3.98 | 3.61 |
| 21-Nov-31 | 1.00 | 21,000 | 3.63 | -0.26 | -0.20 | 4.01 | 3.63 |
| 21-May-32 | 1.25 | 38,400 | 3.64 | -0.27 | -0.20 | 4.02 | 3.64 |
| 21-Nov-32 | 1.75 | 27,800 | 3.65 | -0.26 | -0.19 | 4.04 | 3.65 |
| 21-Apr-33 | 4.50 | 22,200 | 3.65 | -0.27 | -0.20 | 4.04 | 3.65 |
| 21-Nov-33 | 3.00 | 17,600 | 3.70 | -0.27 | -0.19 | 4.08 | 3.70 |
| 21-Jun-35 | 2.75 | 9,550 | 3.83 | -0.25 | -0.16 | 4.18 | 3.83 |
| 21-Apr-37 | 3.75 | 12,300 | 3.94 | -0.22 | -0.10 | 4.27 | 3.94 |
| 21-Jun-39 | 3.25 | 10,300 | 4.05 | -0.19 | -0.05 | 4.35 | 4.05 |
| 21-May-41 | 2.75 | 13,500 | 4.12 | -0.18 | -0.01 | 4.41 | 4.12 |
| 21-Mar-47 | 3.00 | 13,600 | 4.12 | -0.17 | 0.01 | 4.40 | 4.12 |
| 21-Jun-51 | 1.75 | 18,700 | 4.09 | -0.17 | 0.02 | 4.36 | 4.09 |