Summary: 10-year bond yields up in Australia; ACGB 10-year spread to US Treasury yield narrows from +56bps to +52bps; 10-year bond yields up in the US, major European markets; AOFM issues $3.6 billion worth of bonds, notes.
Locally, long-term ACGB yields started the week with a small decline and then trended up, with “down” days characterised by small falls and “up” days characterised by moderate-to-large rises. By the end of the week, the 3-year ACGB yield had gained 12bps to 3.16%, the 10-year yield had risen by 18bps to 3.68% while the 20-year yield finished 17bps higher at 3.97%. The spread between US and Australian 10-year Treasury bond yields narrowed from +56bps to +52bps.
Over in the US, long-term bond yields started the week with a significant jump which was followed by a partial pull-back. Yields then rose over the remainder of the week.
The first notable report of the US week was not released until Friday night (AEDT). May’s CPI report produced a higher-than-expected increase which a NAB senior economist described as undermining the Fed’s expectation of easing inflationary pressures in the June quarter.
One of the two major measures of US consumer sentiment was also released. The University of Michigan’s Consumer sentiment index dropped from May’s final reading of 58.4 to 50.2, a series-low.
By this stage, the US 2-year Treasury bond yield had jumped 39bps to 3.07%, the 10-year yield had gained 22bps to 3.16% while the 30-year yield finished 10bps higher at 3.19%.
In major euro-zone markets, 10-year bond yields followed a similar path to their US counterpart.
There was little in the way of euro-zone economic news during the week and the only event of note was the meeting of the ECB Governing Council on Thursday.
The ECB left its various policy rates unchanged but 25bps rises were flagged for July and September. The ECB also announced it will cease its Asset Purchase Programme in July. However, maturing bonds will still be re-invested.
By the end of the week, the German 10-year bund yield had jumped 25bps to 1.52% while the French 10-year OAT yield had gained 30bps to 2.09%. The Italian 10-year BTP yield rocketed up 84bps to 3.74% over the week while the British 10-year gilt yield finished 28bps higher at 2.44%.
The AOFM held two bond tenders during the week. $300 million of June 2051s and $800 million of September 2026s were priced at yields of 3.80% and 3.25% 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 2021/2022 financial year-to-date (not taking into account buy-backs or short-term Treasury note tenders) is $99.4 billion. There are currently $827.913 billion of Treasury bonds and $36.986 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 $23.75 billion of short-term Treasury notes currently outstanding after $4.5 billion matured on Friday.
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Nov-22 | 2.25 | 26,500 | 1.64 | 0.17 | 0.18 | 1.67 | 1.45 |
| 21-Apr-23 | 5.50 | 34,200 | 2.32 | 0.18 | 0.17 | 2.36 | 2.13 |
| 21-Apr-24 | 2.75 | 35,900 | 2.75 | 0.15 | 0.01 | 2.80 | 2.62 |
| 21-Nov-24 | 0.25 | 40,600 | 2.93 | 0.10 | 0.02 | 2.99 | 2.85 |
| 21-Apr-25 | 3.25 | 39,100 | 3.11 | 0.16 | 0.13 | 3.12 | 2.97 |
| 21-Nov-25 | 0.25 | 22,000 | 3.25 | 0.17 | 0.13 | 3.25 | 3.10 |
| 21-Apr-26 | 4.25 | 38,100 | 3.28 | 0.17 | 0.17 | 3.28 | 3.13 |
| 21-Sep-26 | 0.50 | 34,600 | 3.33 | 0.17 | 0.17 | 3.33 | 3.18 |
| 21-Apr-27 | 4.75 | 34,600 | 3.35 | 0.17 | 0.18 | 3.35 | 3.21 |
| 21-Nov-27 | 2.75 | 30,700 | 3.41 | 0.17 | 0.18 | 3.41 | 3.27 |
| 21-May-28 | 2.25 | 29,700 | 3.47 | 0.18 | 0.21 | 3.47 | 3.31 |
| 21-Nov-28 | 2.75 | 32,600 | 3.51 | 0.18 | 0.22 | 3.51 | 3.34 |
| 21-Apr-29 | 3.25 | 33,000 | 3.54 | 0.19 | 0.23 | 3.54 | 3.36 |
| 21-Nov-29 | 2.75 | 33,400 | 3.59 | 0.19 | 0.25 | 3.59 | 3.40 |
| 21-May-30 | 2.50 | 37,100 | 3.62 | 0.19 | 0.25 | 3.62 | 3.42 |
| 21-Dec-30 | 1.00 | 24,700 | 3.65 | 0.20 | 0.21 | 3.65 | 3.46 |
| 21-Jun-31 | 1.50 | 38,100 | 3.66 | 0.20 | 0.21 | 3.66 | 3.47 |
| 21-Nov-31 | 1.00 | 21,000 | 3.67 | 0.20 | 0.21 | 3.67 | 3.48 |
| 21-May-32 | 1.25 | 34,200 | 3.67 | 0.19 | 0.21 | 3.67 | 3.48 |
| 21-Apr-33 | 4.50 | 19,800 | 3.69 | 0.20 | 0.21 | 3.69 | 3.50 |
| 21-Jun-35 | 2.75 | 9,550 | 3.80 | 0.18 | 0.25 | 3.80 | 3.62 |
| 21-Apr-37 | 3.75 | 12,000 | 3.85 | 0.17 | 0.24 | 3.85 | 3.67 |
| 21-Jun-39 | 3.25 | 10,300 | 3.91 | 0.17 | 0.22 | 3.91 | 3.74 |
| 21-May-41 | 2.75 | 13,500 | 3.97 | 0.17 | 0.21 | 3.97 | 3.79 |
| 21-Mar-47 | 3.00 | 13,300 | 4.00 | 0.17 | 0.21 | 4.00 | 3.88 |
| 21-Jun-51 | 1.75 | 15,000 | 3.96 | 0.17 | 0.19 | 3.96 | 3.79 |