Summary: Bond yields up in Australia; ACGB 10-year spread to US Treasury yield widens from +28bps to +62bps; 10-year bond yields steady in US, up in major European markets; AOFM issues $3.95 billion worth of bonds, notes.
Locally, long-term ACGB yields started the week with a big jump, following the lead of US markets on Friday night, before declining a little on Tuesday. Yields then rose through the remainder of the week, with another large rise on Friday. By this point, the 3-year ACGB yield had gained 29bps to 3.19% while 10-year and 20-year yield each finished 34bps higher at 3.45% and 3.80% respectively. The spread between US and Australian 10-year Treasury bond yields widened from +28bps to +62bps.
Over in the US, long-term bond yields fell noticeably at the start of the week, reversed course over the next three days and then fell back at the end of the week.
July’s CPI report was released midweek and it produced a lower-than-expected result of no change. However, while the annual inflation rate slowed from 9.0% to 8.5%, the core inflation rate remained unchanged at 5.9%.
The Atlanta Fed’s Nowcast model was also updated. The September quarter GDP growth estimate was raised from 1.4% annualised, or a 0.3% expansion over the quarter, to 2.5% annualised.
Producer price indices for July were released the next day. Producer prices decreased by 0.5% over the month but still increased by 9.7% over the year to July.
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 improved a little further, rising from July’s final reading of 51.5 to 55.1, still not far from its series-low.
By this point, the US 2-year Treasury bond yield had added 4bps to 3.25%, the 10-year yield had returned to its starting point at 2.83% while the 30-year yield finished 4bps higher at 3.11%.
In major euro-zone markets, 10-year bond yields followed a somewhat similar path to their US counterparts except they declined a little midweek and rose modestly at the end of the week.
There was not much of note until the end of the week when June’s industrial production report was released. Output expanded by 0.7%, greater than had been expected and 2.4% higher than in June 2021.
By this point, the German 10-year bund yield had added 4bps to 0.99% while the French 10-year OAT yield had gained 6bps to 1.55%. The Italian 10-year BTP yield increased by 5bps to 3.07% over the week while the British 10-year gilt yield finished 6bps higher at 2.11%.
The AOFM held three vanilla bond tenders and one index-linked bond (ILB) tender during the week. $300 million of April 2037s, $800 million of November 2031s and $700 million of September 2026s were priced at yields of 3.40%, 3.18% and 3.17% respectively while $150 million of August 2040 ILBs were priced at a real yield of 1.24%. There were also two Treasury note tenders which raised $2 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 $9.2 billion. There are currently $814.85 billion of Treasury bonds and $37.336 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 $25.50 billion of short-term Treasury notes currently outstanding after $5.5 billion matured on Friday.
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 $7.3 billion. There are currently $813.05 billion of Treasury bonds and $37.236 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 $29.00 billion of short-term Treasury notes currently outstanding.
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Nov-22 | 2.25 | 26,500 | 2.28 | 0.00 | 0.36 | 2.29 | 2.24 |
| 21-Apr-23 | 5.50 | 34,200 | 2.85 | 0.24 | 0.44 | 2.85 | 2.72 |
| 21-Apr-24 | 2.75 | 35,900 | 2.88 | 0.26 | 0.31 | 2.88 | 2.69 |
| 21-Nov-24 | 0.25 | 41,300 | 3.01 | 0.28 | 0.24 | 3.01 | 2.85 |
| 21-Apr-25 | 3.25 | 40,100 | 3.10 | 0.30 | 0.15 | 3.10 | 2.93 |
| 21-Nov-25 | 0.25 | 22,000 | 3.15 | 0.30 | 0.09 | 3.15 | 2.98 |
| 21-Apr-26 | 4.25 | 38,100 | 3.16 | 0.30 | 0.07 | 3.16 | 2.99 |
| 21-Sep-26 | 0.50 | 36,000 | 3.20 | 0.32 | 0.07 | 3.20 | 3.01 |
| 21-Apr-27 | 4.75 | 36,000 | 3.21 | 0.32 | 0.06 | 3.21 | 3.01 |
| 21-Nov-27 | 2.75 | 30,700 | 3.24 | 0.33 | 0.03 | 3.24 | 3.04 |
| 21-May-28 | 2.25 | 29,700 | 3.27 | 0.34 | 0.02 | 3.27 | 3.05 |
| 21-Nov-28 | 2.75 | 32,600 | 3.30 | 0.35 | 0.01 | 3.30 | 3.07 |
| 21-Apr-29 | 3.25 | 33,000 | 3.31 | 0.34 | -0.01 | 3.31 | 3.08 |
| 21-Nov-29 | 2.75 | 33,400 | 3.34 | 0.34 | -0.03 | 3.34 | 3.11 |
| 21-May-30 | 2.50 | 37,100 | 3.36 | 0.34 | -0.03 | 3.36 | 3.13 |
| 21-Dec-30 | 1.00 | 24,700 | 3.40 | 0.34 | -0.05 | 3.40 | 3.16 |
| 21-Jun-31 | 1.50 | 38,100 | 3.41 | 0.34 | -0.05 | 3.41 | 3.17 |
| 21-Nov-31 | 1.00 | 21,000 | 3.42 | 0.35 | -0.05 | 3.42 | 3.18 |
| 21-May-32 | 1.25 | 36,000 | 3.43 | 0.34 | -0.05 | 3.43 | 3.18 |
| 21-Apr-33 | 4.50 | 20,600 | 3.45 | 0.35 | -0.05 | 3.45 | 3.21 |
| 21-Jun-35 | 2.75 | 9,550 | 3.57 | 0.34 | -0.04 | 3.57 | 3.32 |
| 21-Apr-37 | 3.75 | 12,300 | 3.65 | 0.34 | -0.02 | 3.65 | 3.38 |
| 21-Jun-39 | 3.25 | 10,300 | 3.73 | 0.34 | 0.02 | 3.73 | 3.46 |
| 21-May-41 | 2.75 | 13,500 | 3.80 | 0.34 | 0.05 | 3.80 | 3.52 |
| 21-Mar-47 | 3.00 | 13,600 | 3.82 | 0.34 | 0.07 | 3.82 | 3.54 |
| 21-Jun-51 | 1.75 | 15,000 | 3.79 | 0.33 | 0.05 | 3.79 | 3.51 |