Summary: Bond yields lower in Australia; ACGB 10-year spread to US Treasury yield narrows from +21bps to +2bps; 10-year bond yields up in US, major European markets; AOFM issues $4.5 billion worth of bonds, notes.
Locally, long-term ACGB yields fell noticeably on Tuesday and Wednesday before reversing course over the final two days of the week. By this stage, the 3-year ACGB yield had shed 17bps to 3.50%, the 10-year yield had lost 5bps to 3.87% while the 20-year yield finished 1bp lower at 4.12%. The spread between US and Australian 10-year Treasury bond yields narrowed from +21bps to +2bps.
Over in the US, 10-year bond yields rose substantially at the start of the week, only to plummet the next day. However, yields then increased over the remainder of the week.
The ISM’s September Manufacturing PMI report was released at the start of the week. This latest reading of the index undershot expectations and, while it implies US manufacturing is still expanding, it is at the lowest rate since the US recovery began in 2020.
August’s JOLTS report came out on Tuesday and it indicated the US quit rate remained steady at 2.7%. Quits and separations increased but openings fell substantially.
Midweek, the ISM’s services activity index declined from 56.9 to 56.7 in September.
At the end of the week, September’s non-farm payrolls report produced another rise in employment which slightly exceeded expectations. The jobless rate dropped back from 3.7% to 3.5% as the participation rate slipped back from 62.4% to 62.3%.
The Atlanta Fed’s Nowcast model was also updated. The September quarter GDP growth estimate was raised to 2.9% annualised, or a 0.7% expansion over the quarter, on the back of higher employment numbers and wholesale trade figures.
By this point, the US 2-year Treasury bond yield had gained 13bps to 4.28%, the 10-year yield had added 14bps to 3.85% while the 30-year yield finished 15bps higher at 3.81%.
In major euro-zone markets, 10-year bond yields followed similar paths to their US counterpart except their falls on Tuesday were noticeably larger.
There was little of note in terms of economic reports during the week.
By the end of the week, German 10-year bund and French 10-year OAT yields had both added 2bps to 2.14% and 2.74% respectively. The Italian 10-year BTP yield returned to its starting point at 4.57% while the British 10-year gilt yield finished 19bps higher at 4.22%.
The AOFM held two bond tenders during the week. $800 million of May 2032s and $700 million of November 2025s were priced at yields of 3.68% and 3.43%. There were also three Treasury note tenders which raised a total of $3.0 billion.
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 $20.75 billion. There are currently $826.05 billion of Treasury bonds and $37.686 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 $25.00 billion of short-term Treasury notes currently outstanding after $4.5 billion matured on Friday.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH |
|---|---|---|---|---|---|
| 21-Nov-22 | 2.25 | 26,500 | 2.64 | -0.23 | 0.22 |
| 21-Apr-23 | 5.50 | 34,200 | 2.94 | -0.26 | 0.16 |
| 21-Apr-24 | 2.75 | 35,900 | 3.08 | -0.22 | 0.06 |
| 21-Nov-24 | 0.25 | 41,300 | 3.27 | -0.19 | 0.12 |
| 21-Apr-25 | 3.25 | 40,100 | 3.34 | -0.19 | 0.09 |
| 21-Nov-25 | 0.25 | 38,000 | 3.43 | -0.17 | 0.10 |
| 21-Apr-26 | 4.25 | 38,100 | 3.46 | -0.16 | 0.13 |
| 21-Sep-26 | 0.50 | 36,700 | 3.50 | -0.15 | 0.15 |
| 21-Apr-27 | 4.75 | 36,000 | 3.52 | -0.14 | 0.16 |
| 21-Nov-27 | 2.75 | 31,400 | 3.57 | -0.13 | 0.16 |
| 21-May-28 | 2.25 | 29,700 | 3.61 | -0.10 | 0.17 |
| 21-Nov-28 | 2.75 | 33,300 | 3.65 | -0.09 | 0.18 |
| 21-Apr-29 | 3.25 | 33,700 | 3.68 | -0.08 | 0.18 |
| 21-Nov-29 | 2.75 | 33,400 | 3.72 | -0.08 | 0.18 |
| 21-May-30 | 2.50 | 37,100 | 3.76 | -0.07 | 0.19 |
| 21-Dec-30 | 1.00 | 38,700 | 3.80 | -0.06 | 0.19 |
| 21-Jun-31 | 1.50 | 38,100 | 3.82 | -0.06 | 0.20 |
| 21-Nov-31 | 1.00 | 21,000 | 3.83 | -0.05 | 0.20 |
| 21-May-32 | 1.25 | 38,400 | 3.83 | -0.05 | 0.19 |
| 21-Nov-32 | 1.75 | 26,200 | 3.85 | -0.05 | 0.19 |
| 21-Apr-33 | 4.50 | 22,200 | 3.85 | -0.05 | 0.19 |
| 21-Nov-22 | 3.00 | 17,600 | 3.89 | -0.04 | 0.19 |
| 21-Jun-35 | 2.75 | 9,550 | 3.98 | -0.03 | 0.20 |
| 21-Apr-37 | 3.75 | 12,300 | 4.04 | -0.02 | 0.19 |
| 21-Jun-39 | 3.25 | 10,300 | 4.10 | -0.01 | 0.19 |
| 21-May-41 | 2.75 | 13,500 | 4.13 | -0.01 | 0.18 |
| 21-Mar-47 | 3.00 | 13,600 | 4.12 | -0.01 | 0.18 |
| 21-Jun-51 | 1.75 | 18,400 | 4.07 | 0.00 | 0.19 |