Summary: 10-year bond yields down modestly in Australia, up in the US, mixed in major European markets; ACGB 10-year spread to US Treasury yield narrows from +29bps to +20bps; AOFM issues $2.0 billion worth of bonds, notes.
Locally, long-term ACGB yields fell away for the first two days of the shortened week and then reversed couse over the last two days. By the end of the week, the 3-year ACGB yield had returned to its starting point at 2.86%, the 10-year yield had slipped 1bp to 3.17% while the 20-year yield finished 6bps lower at 3.44%. The spread between US and Australian 10-year Treasury bond yields narrowed from +29bps to +20bps.
Over in the US, long-term bond yields fell noticeably early in the week, recovered a good chunk of the falls midweek and then increased substantially again at the end of the week.
The Conference Board’s April reading of its Consumer Sentiment Index was released on Tuesday. The index slid a little and was less than expected but The Conference Board and economists greeted the figures with some degree of optimism.
March quarter GDP figures were released a couple of days later. The US economy contracted over the quarter rather than expanding by 0.2% as expected. Imports were a major drag.
At the end of the week, the latest report on personal consumption expenditures indicated core PCE price inflation increased by 0.3% in March and by 5.2% on annual basis, down from 5.3% in February.
By the end of the week, US 2-year and 10-year Treasury bond yields had both gained 4bps to 2.71% and 2.93% respectively while the 30-year yield finished 5bps higher at 3.00%.
In major euro-zone markets, 10-year bond yields followed abroadly-similar pattern to their US counterparts, falling in the ealy part of the week and rising in the latter part.
Germany’s ifo Institute released the April reading of its business climate index at the start of the week. The index increased a touch as German firms’ views of the outlook improved despite the economic fallout from the Ukraine war.
At the end of the week, the “flash” April consumer price index (CPI) report produced an annual inflation rate of 7.5% in the euro-zone, in line with expectations and March’s final reading. Core annual CPI increased from 2.9% to 3.5%.
March quarter GDP figures were released at the same time. The euro-zone economy expanded by just 0.2%, as expected, taking the annual growth rate from 4.7% to 5.0%.
By this point, the German 10-year bund yield had lost 3bps to 0.94% while the French 10-year OAT yield had gained 5bps to 1.46%. The Italian 10-year BTP yield rose by 11bps to 2.78% over the week while the British 10-year gilt yield finished 5bps lower at 1.91%.
The AOFM held the one bond tender this week; $1 billion worth of September 2026s were priced at a yield of 2.90%.
There were also two Treasury note tenders which raised $1 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 $91.7 billion. There are currently $820.813 billion of Treasury bonds and $36.386 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 $28.00 billion of short-term Treasury notes currently outstanding.
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Nov-22 | 2.25 | 26,500 | 1.16 | 0.16 | 0.66 | 1.16 | 0.98 |
| 21-Apr-23 | 5.50 | 34,200 | 1.84 | 0.19 | 0.93 | 1.84 | 1.62 |
| 21-Apr-24 | 2.75 | 35,900 | 2.45 | 0.07 | 0.86 | 2.45 | 2.35 |
| 21-Nov-24 | 0.25 | 40,600 | 2.60 | 0.04 | 0.56 | 2.60 | 2.52 |
| 21-Apr-25 | 3.25 | 38,100 | 2.71 | 0.02 | 0.50 | 2.71 | 2.65 |
| 21-Nov-25 | 0.25 | 22,000 | 2.81 | -0.01 | 0.44 | 2.81 | 2.77 |
| 21-Apr-26 | 4.25 | 38,100 | 2.83 | 0.00 | 0.43 | 2.83 | 2.79 |
| 21-Sep-26 | 0.50 | 32,800 | 2.88 | -0.02 | 0.40 | 2.88 | 2.85 |
| 21-Apr-27 | 4.75 | 33,900 | 2.90 | -0.02 | 0.40 | 2.90 | 2.86 |
| 21-Nov-27 | 2.75 | 29,700 | 2.95 | -0.02 | 0.39 | 2.95 | 2.91 |
| 21-May-28 | 2.25 | 29,700 | 2.99 | -0.02 | 0.39 | 2.99 | 2.95 |
| 21-Nov-28 | 2.75 | 32,600 | 3.01 | -0.02 | 0.38 | 3.01 | 2.96 |
| 21-Apr-29 | 3.25 | 33,000 | 3.02 | -0.01 | 0.38 | 3.02 | 2.97 |
| 21-Nov-29 | 2.75 | 33,400 | 3.04 | -0.01 | 0.37 | 3.04 | 2.99 |
| 21-May-30 | 2.50 | 37,100 | 3.06 | -0.01 | 0.35 | 3.06 | 3.01 |
| 21-Dec-30 | 1.00 | 24,700 | 3.09 | -0.01 | 0.35 | 3.09 | 3.03 |
| 21-Jun-31 | 1.50 | 37,300 | 3.10 | 0.00 | 0.36 | 3.10 | 3.04 |
| 21-Nov-31 | 1.00 | 21,000 | 3.11 | -0.01 | 0.35 | 3.11 | 3.05 |
| 21-May-32 | 1.25 | 33,200 | 3.12 | -0.01 | 0.34 | 3.12 | 3.06 |
| 21-Apr-33 | 4.50 | 19,800 | 3.13 | 0.00 | 0.35 | 3.13 | 3.07 |
| 21-Jun-35 | 2.75 | 9,550 | 3.23 | -0.02 | 0.33 | 3.23 | 3.17 |
| 21-Apr-37 | 3.75 | 12,000 | 3.28 | -0.04 | 0.33 | 3.30 | 3.24 |
| 21-Jun-39 | 3.25 | 10,300 | 3.36 | -0.05 | 0.31 | 3.39 | 3.33 |
| 21-May-41 | 2.75 | 13,500 | 3.41 | -0.06 | 0.30 | 3.46 | 3.39 |
| 21-Mar-47 | 3.00 | 13,300 | 3.45 | -0.07 | 0.26 | 3.51 | 3.44 |
| 21-Jun-51 | 1.75 | 15,000 | 3.44 | -0.07 | 0.25 | 3.50 | 3.43 |