Government

Summary: 10-year bond yields up again in Australia, US, European markets; ACGB 10-year spread to US Treasury yield widens from +19bps to +29bps; AOFM issues $1.5 billion worth of notes.

Locally, long-term ACGB yields rose on three of the four days of the shortened week, with just a modest dip on Thursday. By the end of the week, the 3-year ACGB yield had gained 31bps to 2.86%, the 10-year yield had added 16bps to 3.18% while the 20-year yield finished 14bps higher at 3.50%. The spread between US and Australian 10-year Treasury bond yields widened from +19bps to +29bps.

Over in the US, long-term bond yields see-sawed over much of the week, with rises generally outweighing falls.

Notable US economic reports were largely absent and the only one of note came out on Thursday. The Conference Board’s March reading of its Leading Index met expectations in what was described as a “broad-based improvement.”

By the end of the week, the US 2-year Treasury bond yield had gained 22bps to 2.67%, the 10-year yield had added 6bps to 2.89% while the 30-year yield finished 3bps higher at 2.95%.

In major euro-zone markets, 10-year bond yields mostly increased each day, although there was a down day midweek.

There were a couple of notable reports released during the week.

Euro-zone industrial production in February met expectations on Wednesday, although January’s growth figure was revised down from zero to -0.7%.

The results of April’s consumer sentiment survey were released the next day. They indicated euro-zone consumers had become a little less pessimistic, despite the ongoing war in Ukraine.

By the end of the week, the German 10-year bund yield had gained 13bps to 0.97% while the French 10-year OAT yield had added 7bps to 1.41%. The Italian 10-year BTP yield rose by 18bps to 2.67% over the week while the British 10-year gilt yield finished 7bps higher at 1.96%.

The AOFM did not hold any bond tenders during the week and only held its usual dual note tenders 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 $90.7 billion. There are currently $819.813 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 $27.00 billion of short-term Treasury notes currently outstanding after $7 billion worth of notes 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	1.00	0.30	0.52	1.00	0.72
21-Apr-23	5.50	34,200	1.64	0.38	0.82	1.64	1.30
21-Apr-24	2.75	35,900	2.38	0.36	0.98	2.38	2.07
21-Nov-24	0.25	40,600	2.56	0.33	0.79	2.56	2.33
21-Apr-25	3.25	38,100	2.69	0.33	0.77	2.69	2.42
21-Nov-25	0.25	22,000	2.82	0.32	0.74	2.82	2.60
21-Apr-26	4.25	38,100	2.84	0.31	0.71	2.84	2.58
21-Sep-26	0.50	32,800	2.90	0.30	0.70	2.90	2.65
21-Apr-27	4.75	33,900	2.92	0.30	0.68	2.92	2.67
21-Nov-27	2.75	29,700	2.97	0.28	0.66	2.97	2.74
21-May-28	2.25	29,700	3.01	0.25	0.65	3.01	2.80
21-Nov-28	2.75	32,600	3.03	0.24	0.63	3.03	2.83
21-Apr-29	3.25	33,000	3.04	0.22	0.61	3.04	2.86
21-Nov-29	2.75	33,400	3.06	0.20	0.60	3.06	2.90
21-May-30	2.50	37,100	3.07	0.19	0.58	3.07	2.93
21-Dec-30	1.00	24,700	3.10	0.17	0.57	3.10	3.02
21-Jun-31	1.50	37,300	3.11	0.17	0.56	3.11	3.04
21-Nov-31	1.00	21,000	3.12	0.16	0.56	3.12	3.05
21-May-32	1.25	33,200	3.13	0.16	0.55	3.13	3.06
21-Apr-33	4.50	19,800	3.14	0.16	0.55	3.14	3.08
21-Jun-35	2.75	9,550	3.25	0.15	0.55	3.25	3.15
21-Apr-37	3.75	12,000	3.32	0.16	0.54	3.32	3.21
21-Jun-39	3.25	10,300	3.41	0.16	0.53	3.41	3.30
21-May-41	2.75	13,500	3.47	0.14	0.51	3.47	3.38
21-Mar-47	3.00	13,300	3.52	0.12	0.47	3.52	3.44
21-Jun-51	1.75	15,000	3.51	0.12	0.46	3.52	3.44