Summary: Bond yields higher in Australia; ACGB 10-year spread to US Treasury yield “tightens” from -26bps to -30bps; 10-year bond yields up in US, major European markets; AOFM issues $2.8 billion worth of bonds, notes.
Locally, long-term ACGB yields rose through the week until Friday when yields fell back. By the end of it, the 3-year ACGB yield had gained 7bps to 3.40%, the 10-year yield had added 11bps to 3.86% while the 20-year yield finished 13bps higher at 4.21%. The spread between US and Australian 10-year Treasury bond yields “tightened” from -26bps to -30bps.
Over in the US, 10-year bond yields rose through much of the week with the exception of Tuesday when yields slipped.
September’s JOLTS report came out on Tuesday and it indicated the US quit rate remained steady at 2.7%. Quits and separations declined while openings increased.
The ISM’s October Manufacturing PMI report was also released. The latest reading fell again, this time to just north of 50.0%
The FOMC’s two-day meeting ended on Wednesday and another 75bps increase to its target range for the federal funds rate was announced.
The Atlanta Fed’s Nowcast model was updated on Thursday. The December quarter GDP growth estimate was raised to 3.6% annualised, or a 0.9% expansion over the quarter.
At the end of the week, October’s non-farm payrolls report produced another rise in employment which exceeded expectations. However, the jobless rate still rose from 3.5% to 3.7% and the participation rate slipped back from 62.4% to 62.2%.
By this point, the US 2-year Treasury bond yield had gained 29bps to 4.69%, the 10-year yield had added 15bps to 4.16% while the 30-year yield finished 11bps higher at 4.25%.
In major euro-zone markets, 10-year bond yields followed similar paths to their US counterpart.
The “flash” October consumer price index (CPI) report was released at the start of the week. It produced an annual inflation rate of 10.7% in the euro-zone, higher than the expected 10.3% as well as September’s final reading of 10.0%. Core annual CPI increased from 4.8% to 5.0%.
The BoE announced another 75bps rise of its Bank Rate on Thursday night, taking the rate at which the BoE pays on commercial bank’s deposits with it to 3.00%.
By the end of the week, the German 10-year bund yield gained 20bps to 2.30% and the French 10-year OAT yield had added 23bps to 2.83%. The Italian 10-year BTP yield increased by 31bps to 4.45% while the British 10-year gilt yield finished 6bps higher at 3.53%.
The AOFM held just one bond tender during the week, with $800 million of November 2028s priced at a yield of 3.49%. 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 $25.75 billion. There are currently $830.95 billion of Treasury bonds and $37.786 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-Nov-22 | 2.25 | 26,500 | 2.90 | 0.14 | 0.02 | 2.90 | 2.78 |
| 21-Apr-23 | 5.50 | 34,200 | 3.21 | 0.08 | 0.01 | 3.21 | 3.10 |
| 21-Apr-24 | 2.75 | 35,900 | 3.29 | 0.16 | -0.01 | 3.29 | 3.13 |
| 21-Nov-24 | 0.25 | 41,300 | 3.38 | 0.17 | -0.08 | 3.38 | 3.19 |
| 21-Apr-25 | 3.25 | 40,800 | 3.41 | 0.19 | -0.12 | 3.41 | 3.21 |
| 21-Nov-25 | 0.25 | 38,000 | 3.46 | 0.18 | -0.13 | 3.46 | 3.25 |
| 21-Apr-26 | 4.25 | 38,100 | 3.49 | 0.18 | -0.13 | 3.49 | 3.28 |
| 21-Sep-26 | 0.50 | 36,700 | 3.53 | 0.18 | -0.12 | 3.53 | 3.32 |
| 21-Apr-27 | 4.75 | 36,700 | 3.56 | 0.19 | -0.10 | 3.56 | 3.36 |
| 21-Nov-27 | 2.75 | 31,400 | 3.62 | 0.19 | -0.08 | 3.62 | 3.42 |
| 21-May-28 | 2.25 | 29,700 | 3.66 | 0.19 | -0.06 | 3.66 | 3.48 |
| 21-Nov-28 | 2.75 | 34,100 | 3.71 | 0.19 | -0.03 | 3.71 | 3.52 |
| 21-Apr-29 | 3.25 | 34,500 | 3.74 | 0.19 | -0.03 | 3.74 | 3.56 |
| 21-Nov-29 | 2.75 | 33,400 | 3.78 | 0.19 | -0.02 | 3.78 | 3.61 |
| 21-May-30 | 2.50 | 37,100 | 3.82 | 0.19 | -0.01 | 3.82 | 3.65 |
| 21-Dec-30 | 1.00 | 38,700 | 3.86 | 0.19 | 0.00 | 3.86 | 3.69 |
| 21-Jun-31 | 1.50 | 38,100 | 3.88 | 0.18 | 0.00 | 3.88 | 3.71 |
| 21-Nov-31 | 1.00 | 21,000 | 3.89 | 0.18 | 0.01 | 3.89 | 3.73 |
| 21-May-32 | 1.25 | 38,400 | 3.90 | 0.18 | 0.02 | 3.90 | 3.74 |
| 21-Nov-32 | 1.75 | 27,800 | 3.92 | 0.19 | 0.02 | 3.92 | 3.75 |
| 21-Apr-33 | 4.50 | 22,200 | 3.92 | 0.18 | 0.02 | 3.92 | 3.76 |
| 21-Nov-22 | 3.00 | 17,600 | 3.96 | 0.18 | 0.04 | 3.96 | 3.80 |
| 21-Jun-35 | 2.75 | 9,550 | 4.08 | 0.19 | 0.07 | 4.08 | 3.91 |
| 21-Apr-37 | 3.75 | 12,300 | 4.16 | 0.20 | 0.10 | 4.16 | 3.98 |
| 21-Jun-39 | 3.25 | 10,300 | 4.24 | 0.20 | 0.13 | 4.24 | 4.05 |
| 21-May-41 | 2.75 | 13,500 | 4.30 | 0.20 | 0.16 | 4.30 | 4.11 |
| 21-Mar-47 | 3.00 | 13,600 | 4.29 | 0.20 | 0.17 | 4.29 | 4.16 |
| 21-Jun-51 | 1.75 | 18,700 | 4.25 | 0.19 | 0.18 | 4.25 | 4.07 |