Summary: Bond yields down in Australia; ACGB 10-year spread to US Treasury yield tightens from +76bps to +45bps; 10-year bond yields up in US, major European markets; AOFM issues $4.00 billion worth of bonds, notes.
Locally, long-term ACGB yields fell over the first three days of the week, with a particular large fall midweek. Yields then partially recovered these falls over the remainder of the week. By the end of it, the 3-year ACGB yield had lost 4bps to 3.16%, the 10-year yield had shed 12bps to 3.53% while the 20-year yield finished 9bps lower at 3.77%. The spread between US and Australian 10-year Treasury bond yields tightened from +76bps to +45bps.
Over in the US, long-term bond yields started the week sedately but then fell noticeably on Tuesday. Yields then bounced the next day and continued rising for the remainder of the week.
May’s JOLTS report came out midweek and it indicated the US quit rate had slipped. Job openings and quits declined while separations increased.
The minutes of the Fed’s last FOMC meeting were also released. While there was nothing really new in them, they did reinforce expectations of another large rate increase at the next meeting in late July and the need for a restrictive policy stance.
At the end of the week, June’s non-farm payrolls report produced another rise in employment which exceeded expectations. The jobless rate remained unchanged at 3.6% while the participation rate slipped back to 62.2%.
By this point, the US 2-year Treasury bond yield had gained 28bps to 3.11%, the 10-year yield had added 19bps to 3.08% while the 30-year yield finished 13bps higher at 3.25%.
In major euro-zone markets, 10-year bond yields followed similar paths to their US counterparts, although they moved in opposite directions on Wednesday.
There was nothing of particular note in terms of economic reports.
By the end of the week, the German 10-year bund yield had gained 11bps to 1.34% while the French 10-year OAT yield had added 9bps to 1.89%. The Italian 10-year BTP yield increased by 18bps to 3.27% over the week while the British 10-year gilt yield finished 15bps higher at 2.23%.
The AOFM held two bond tenders during the week. $800 million of April 2033s and $700 million of November 2024s were priced at yields of 3.44% and 2.80% respectively.
There were also two Treasury note tenders which raised $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 $1.50 billion. There are currently $832.713 billion of Treasury bonds and $37.236 billion of Treasury index-linked bonds on issue. The next series to mature does so on 15 July when $24.763 billion worth of bonds are due. There are also $26.00 billion of short-term Treasury notes currently outstanding after $4 billion matured on Friday.
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Nov-22 | 2.25 | 26,500 | 1.92 | 0.10 | 0.46 | 1.92 | 1.84 |
| 21-Apr-23 | 5.50 | 34,200 | 2.41 | 0.10 | 0.27 | 2.41 | 2.33 |
| 21-Apr-24 | 2.75 | 35,900 | 2.57 | 0.08 | -0.03 | 2.57 | 2.45 |
| 21-Nov-24 | 0.25 | 41,300 | 2.78 | 0.00 | -0.05 | 2.78 | 2.69 |
| 21-Apr-25 | 3.25 | 40,100 | 2.96 | -0.01 | 0.00 | 2.96 | 2.88 |
| 21-Nov-25 | 0.25 | 22,000 | 3.06 | -0.02 | -0.02 | 3.06 | 2.98 |
| 21-Apr-26 | 4.25 | 38,100 | 3.09 | -0.03 | -0.02 | 3.09 | 3.01 |
| 21-Sep-26 | 0.50 | 34,600 | 3.12 | -0.05 | -0.04 | 3.14 | 3.04 |
| 21-Apr-27 | 4.75 | 34,600 | 3.15 | -0.06 | -0.03 | 3.17 | 3.07 |
| 21-Nov-27 | 2.75 | 30,700 | 3.21 | -0.07 | -0.03 | 3.24 | 3.13 |
| 21-May-28 | 2.25 | 29,700 | 3.25 | -0.08 | -0.05 | 3.30 | 3.17 |
| 21-Nov-28 | 2.75 | 32,600 | 3.29 | -0.09 | -0.04 | 3.34 | 3.21 |
| 21-Apr-29 | 3.25 | 33,000 | 3.32 | -0.09 | -0.03 | 3.38 | 3.24 |
| 21-Nov-29 | 2.75 | 33,400 | 3.36 | -0.10 | -0.03 | 3.43 | 3.28 |
| 21-May-30 | 2.50 | 37,100 | 3.40 | -0.10 | -0.02 | 3.47 | 3.32 |
| 21-Dec-30 | 1.00 | 24,700 | 3.44 | -0.11 | -0.01 | 3.52 | 3.37 |
| 21-Jun-31 | 1.50 | 38,100 | 3.46 | -0.11 | 0.00 | 3.54 | 3.38 |
| 21-Nov-31 | 1.00 | 21,000 | 3.47 | -0.12 | 0.00 | 3.56 | 3.40 |
| 21-May-32 | 1.25 | 35,200 | 3.48 | -0.12 | -0.01 | 3.56 | 3.40 |
| 21-Apr-33 | 4.50 | 20,600 | 3.50 | -0.11 | 0.00 | 3.58 | 3.43 |
| 21-Jun-35 | 2.75 | 9,550 | 3.61 | -0.11 | -0.01 | 3.68 | 3.53 |
| 21-Apr-37 | 3.75 | 12,000 | 3.66 | -0.09 | -0.02 | 3.72 | 3.58 |
| 21-Jun-39 | 3.25 | 10,300 | 3.71 | -0.08 | -0.03 | 3.77 | 3.63 |
| 21-May-41 | 2.75 | 13,500 | 3.75 | -0.06 | -0.05 | 3.79 | 3.67 |
| 21-Mar-47 | 3.00 | 13,300 | 3.75 | -0.07 | -0.07 | 3.80 | 3.68 |
| 21-Jun-51 | 1.75 | 15,000 | 3.74 | -0.07 | -0.05 | 3.79 | 3.66 |