Summary: 10-year bond yields up in Australia, US, European markets; ACGB 10-year spread to US Treasury yield tightens from +51bps to +31bps; AOFM issues $2.5 billion worth of bonds, notes.
Locally, long-term ACGB yields rose through most of the week with the exception of Thursday when yields fell back modestly. By the end of the week, the 3-year ACGB yield had gained 14bps to 2.74%, the 10-year yield had increased by 13bps to 3.02% while the 20-year yield finished 8bps higher at 3.28%. The spread between US and Australian 10-year Treasury bond yields tightened from +51ps to +31bps.
Over in the US, long-term bond yields rose noticeably each day, especially so on Tuesday.
Notable data releases in the US during the week were thin on the ground.
On Tuesday, the ISM’s services activity index increased from 56.5 to 58.3 in March, slightly below the 58.6 which had been generally expected.
The next day, the minutes of the Fed’s last FOMC meeting were released. Among other things, they contained plans for the reduction of bonds and other securities held by the US central bank. At USD$60 billion per month for Treasury bonds and $USD$35 billion per month of mortgage-backed securities, the unwinding of the Fed’s previous QE programmes will be aggressive.
The weekly initial jobless claims report was released as usual on Thursday. Total claims amounted to 0.166 million for the week to Saturday 2 April, 5,000 fewer claims than in the previous week after revisions. As at 26 March, continuing claims (seasonally adjusted) totalled 1.523 million, a 17,000 rise from the previous week’s total after revisions.
By the end of the week, the US 2-year Treasury bond yield had added 6bps to 2.52%, the 10-year yield had gained 33bps to 2.71% while the 30-year yield finished 28bps lower at 2.72%.
In major euro-zone markets, 10-year bond yields declined at the start of the week but then rose steadily through the remainder. As in the US, Tuesday’s rises were large.
There were no especially notable reports, although the minutes of the last ECB meeting were released towards the end of the week, providing an indication the ECB is looking to tighten monetary policy soon.
By the end of the week, the German 10-year bund yield had gained 15bps to 0.70% while the French 10-year OAT yield had gained 23bps to 1.26%. The Italian 10-year BTP yield rose by 26bps to 2.37% over the week while the British 10-year gilt yield finished 14bps higher at 1.75%.
The AOFM held just the one bond tender during the week; $500 million of May 2030 were priced at a yield of 2.91%. The smaller-than-usual amount raised is understandable given a new November 2033 line will be offered by syndication next week.
There were also two Treasury note tenders which raised $2.0 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 $75.6 billion. There are currently $804.813 billion of Treasury bonds and $36.286 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 $31.00 billion of short-term Treasury notes currently outstanding.
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Nov-22 | 2.25 | 26,500 | 0.73 | 0.18 | 0.37 | 0.74 | 0.55 |
| 21-Apr-23 | 5.50 | 34,200 | 1.34 | 0.29 | 0.74 | 1.34 | 1.07 |
| 21-Apr-24 | 2.75 | 35,900 | 2.12 | 0.28 | 1.02 | 2.12 | 1.85 |
| 21-Nov-24 | 0.25 | 40,600 | 2.35 | 0.16 | 0.92 | 2.38 | 2.20 |
| 21-Apr-25 | 3.25 | 38,100 | 2.53 | 0.15 | 0.98 | 2.55 | 2.38 |
| 21-Nov-25 | 0.25 | 22,000 | 2.65 | 0.13 | 0.95 | 2.69 | 2.52 |
| 21-Apr-26 | 4.25 | 38,100 | 2.68 | 0.13 | 0.95 | 2.72 | 2.55 |
| 21-Sep-26 | 0.50 | 32,800 | 2.74 | 0.13 | 0.92 | 2.77 | 2.61 |
| 21-Apr-27 | 4.75 | 33,900 | 2.75 | 0.12 | 0.90 | 2.78 | 2.63 |
| 21-Nov-27 | 2.75 | 29,700 | 2.80 | 0.12 | 0.88 | 2.83 | 2.68 |
| 21-May-28 | 2.25 | 29,700 | 2.82 | 0.12 | 0.86 | 2.85 | 2.71 |
| 21-Nov-28 | 2.75 | 32,600 | 2.84 | 0.12 | 0.84 | 2.86 | 2.73 |
| 21-Apr-29 | 3.25 | 33,000 | 2.85 | 0.12 | 0.84 | 2.87 | 2.74 |
| 21-Nov-29 | 2.75 | 33,400 | 2.87 | 0.12 | 0.82 | 2.88 | 2.76 |
| 21-May-30 | 2.50 | 37,100 | 2.89 | 0.12 | 0.81 | 2.90 | 2.78 |
| 21-Dec-30 | 1.00 | 24,700 | 2.89 | 0.09 | 0.77 | 2.91 | 2.80 |
| 21-Jun-31 | 1.50 | 37,300 | 2.89 | 0.09 | 0.77 | 2.91 | 2.81 |
| 21-Nov-31 | 1.00 | 21,000 | 2.90 | 0.09 | 0.77 | 2.92 | 2.82 |
| 21-May-32 | 1.25 | 33,200 | 2.91 | 0.09 | 0.76 | 2.93 | 2.83 |
| 21-Apr-33 | 4.50 | 19,800 | 2.92 | 0.08 | 0.76 | 2.94 | 2.84 |
| 21-Jun-35 | 2.75 | 9,550 | 3.05 | 0.10 | 0.74 | 3.05 | 2.94 |
| 21-Apr-37 | 3.75 | 12,000 | 3.10 | 0.09 | 0.71 | 3.10 | 3.01 |
| 21-Jun-39 | 3.25 | 10,300 | 3.17 | 0.08 | 0.64 | 3.17 | 3.09 |
| 21-May-41 | 2.75 | 13,500 | 3.22 | 0.06 | 0.61 | 3.22 | 3.15 |
| 21-Mar-47 | 3.00 | 13,300 | 3.28 | 0.05 | 0.58 | 3.28 | 3.24 |
| 21-Jun-51 | 1.75 | 15,000 | 3.28 | 0.05 | 0.57 | 3.28 | 3.22 |