Summary: 10-year bond yields down in Australia, the US, major European markets; ACGB 10-year spread to US Treasury yield widens from +37bps to +52bps; AOFM issues $2.9 billion worth of bonds, notes.
Locally, long-term ACGB yields rose substantially on Monday, then crept up a little the next day before falling over the remainder of the week. By the end of it, the 3-year ACGB yield had dropped by 23bps to 2.94%, the 10-year yield had lost 7bps to 3.44% while the 20-year yield finished 5bps lower at 3.76%. The spread between US and Australian 10-year Treasury bond yields widened from +37bps to +52bps.
Over in the US, long-term bond yields fell consistently and by sizable amounts over the first four days of the week before bouncing on Friday.
The first notable report of the US week was released on Wednesday night (AEDT). April’s CPI report produced a modest increase but it slightly more than expected.
March PPI figures were released the next day. Economists described the latest figures as evidence of “some moderation” in price pressures.
One of two major measures of US consumer sentiment was released at the end of the week. The University of Michigan’s Consumer sentiment index rose from April’s final reading of 65.2 to 59.1, a reading which is still well under the long-term average.
By this point, the US 2-year Treasury bond yield had lost 13bps to 2.58%, the 10-year yield had shed 22bps to 2.92% while the 30-year yield finished 15bps lower at 3.08%.
In major euro-zone markets, 10-year bond yields once again followed a broadly-similar pattern to their US counterparts.
On Tuesday night (AEST), Germany’s ZEW May survey indicated its Economic Sentiment index bounced from April’s reading of -41.0 to -34.3, above the -42.0 which had been generally expected. However, its current conditions index fell from -30.8 to -36.5.
At the end of the week, the latest report on euro-zone industrial production showed it contracted by 0.7% in March, worse than the 0.5% fall which had been expected. German production took a hit during the month while the other three major economies’ production levels also failed to expand.
By this point, the German 10-year bund yield had lost 18bps to 0.95% while the French 10-year OAT yield had shed 27bps to 1.40%. The Italian 10-year BTP yield fell 30bps to 2.85% over the week and the British 10-year gilt yield finished 25bps lower at 1.74%.
The AOFM held two vanilla bond tenders as well as an inflation-linked bond (ILB) tender during the week. $400 million of June 2051s and $1 billion of May 2032s were priced at yields of 3.83% and 3.36% respectively. The February 2050 ILBs priced $150 million at a real yield of 1.32%. There was also a Treasury note tender which raised $1.5 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 $94.55 billion (now includes two ILBs previously omitted). There are currently $823.213 billion of Treasury bonds and $36.836 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 $25.50 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 | 1.31 | -0.15 | 0.57 | 1.42 | 1.31 |
| 21-Apr-23 | 5.50 | 34,200 | 1.97 | -0.18 | 0.63 | 2.13 | 1.97 |
| 21-Apr-24 | 2.75 | 35,900 | 2.55 | -0.18 | 0.43 | 2.76 | 2.55 |
| 21-Nov-24 | 0.25 | 40,600 | 2.73 | -0.19 | 0.38 | 2.94 | 2.73 |
| 21-Apr-25 | 3.25 | 38,100 | 2.81 | -0.17 | 0.29 | 3.03 | 2.81 |
| 21-Nov-25 | 0.25 | 22,000 | 2.92 | -0.20 | 0.27 | 3.14 | 2.92 |
| 21-Apr-26 | 4.25 | 38,100 | 2.95 | -0.16 | 0.27 | 3.17 | 2.95 |
| 21-Sep-26 | 0.50 | 33,800 | 3.01 | -0.15 | 0.27 | 3.22 | 3.01 |
| 21-Apr-27 | 4.75 | 33,900 | 3.04 | -0.13 | 0.29 | 3.25 | 3.04 |
| 21-Nov-27 | 2.75 | 30,700 | 3.11 | -0.12 | 0.31 | 3.32 | 3.11 |
| 21-May-28 | 2.25 | 29,700 | 3.17 | -0.10 | 0.35 | 3.36 | 3.17 |
| 21-Nov-28 | 2.75 | 32,600 | 3.20 | -0.09 | 0.37 | 3.40 | 3.20 |
| 21-Apr-29 | 3.25 | 33,000 | 3.23 | -0.08 | 0.38 | 3.42 | 3.23 |
| 21-Nov-29 | 2.75 | 33,400 | 3.28 | -0.06 | 0.40 | 3.46 | 3.28 |
| 21-May-30 | 2.50 | 37,100 | 3.31 | -0.05 | 0.42 | 3.49 | 3.31 |
| 21-Dec-30 | 1.00 | 24,700 | 3.35 | -0.08 | 0.47 | 3.53 | 3.35 |
| 21-Jun-31 | 1.50 | 37,300 | 3.37 | -0.07 | 0.48 | 3.54 | 3.37 |
| 21-Nov-31 | 1.00 | 21,000 | 3.39 | -0.07 | 0.49 | 3.55 | 3.39 |
| 21-May-32 | 1.25 | 33,200 | 3.40 | -0.07 | 0.49 | 3.56 | 3.40 |
| 21-Apr-33 | 4.50 | 19,800 | 3.42 | -0.06 | 0.50 | 3.58 | 3.42 |
| 21-Jun-35 | 2.75 | 9,550 | 3.55 | 0.00 | 0.50 | 3.69 | 3.55 |
| 21-Apr-37 | 3.75 | 12,000 | 3.61 | 0.00 | 0.51 | 3.75 | 3.61 |
| 21-Jun-39 | 3.25 | 10,300 | 3.69 | 0.00 | 0.52 | 3.82 | 3.69 |
| 21-May-41 | 2.75 | 13,500 | 3.75 | 0.00 | 0.54 | 3.89 | 3.75 |
| 21-Mar-47 | 3.00 | 13,300 | 3.78 | 0.00 | 0.50 | 3.91 | 3.78 |
| 21-Jun-51 | 1.75 | 15,000 | 3.75 | -0.02 | 0.47 | 3.90 | 3.75 |