Summary: 10-year bond yields up in Australia, the US, other major northern-hemisphere markets; ACGB 10-year spread to US Treasury yield tightens from +49bps to +36bps; AOFM issues $4.9 billion worth of bonds, notes.
Locally, long-term ACGB yields rose through most of the week, with an especially noticeable jump on Tuesday following large rises in US yields on Monday night. By the end of the week, the 3-year ACGB yield had gained 30bps to 2.46%, the 10-year yield had increased by 20bps to 2.84% while the 20-year yield finished 14bps higher at 3.16%. The spread between US and Australian 10-year Treasury bond yields tightened from +49bps to +36bps.
Over in the US, long-term bond yields rose by unusually large amounts each day with the exception of Wednesday when yields fell.
There was little in the way of notable data out of the US during the week and the only report of note came out on Thursday.
IHS Markit’s latest flash reading of its composite index increased from February’s final reading of 55.9 to 58.5. The manufacturing index increased from 57.3 to 58.5 and the services index gained 2.4 points to 58.9. IHS Markit’s Chris Williamson said “services led the upturn…though manufacturing output also accelerated…” and noted “capacity continued to be stretched”.
The weekly initial jobless claims report was also released on the same day. Total claims amounted to 0.1587 million for the week to Saturday 19 March, 28,000 fewer claims than in the previous week after revisions. As at 12 March, continuing claims (seasonally adjusted) totalled 1.350 million, a 67,000 fall from the previous week’s total after revisions.
By this point, the US 2-year Treasury bond yield had increased by 34bps to 2.28%, the 10-year yield had gained 33bps to 2.48% while the 30-year yield finished 16bps higher at 2.59%.
In major euro-zone markets, 10-year bond yields followed a similar path to their US counterpart.
Midweek, March’s consumer sentiment survey indicated euro-zone consumers had yet again become more cautious.
IHS Markit released its March flash PMI figures for the euro-zone on Thursday. The preliminary reading of the composite index was 54.5, down from February’s final reading of 55.5. “The survey data underscore how the Russia-Ukraine war is having an immediate and material impact on the euro-zone economy, and highlights the risk of the Eurozone falling into decline in the second quarter,” said IHS Markit’s Chris Williamson.
Germany’s ifo Institute released the March reading of its business climate index at the very end of the week. The index fell considerably as companies’ views of current conditions deteriorated noticeably.
By this point, the German 10-year bund yield had increased by 22bps to 0.59% and the French 10-year OAT yield had gained 18bps to 1.01%. The Italian 10-year BTP yield rose by 20bps to 2.08% over the week while the British 10-year gilt yield finished 19bps higher at 1.69%.
The AOFM held three bond tenders during the week. $400 million of June 2039s, $1 billion of November 2031s and $1 billion of November 2024s were priced at yields of 2.86%, 2.75% and 2.03% 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 $73.3 billion. There are currently $802.513 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 $27.00 billion of short-term Treasury notes currently outstanding.
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Nov-22 | 2.25 | 26,500 | 0.50 | 0.02 | 0.12 | 0.56 | 0.48 |
| 21-Apr-23 | 5.50 | 34,200 | 0.91 | 0.09 | 0.21 | 0.95 | 0.83 |
| 21-Apr-24 | 2.75 | 34,400 | 1.59 | 0.19 | 0.39 | 1.59 | 1.41 |
| 21-Nov-24 | 0.25 | 39,600 | 2.04 | 0.27 | 0.53 | 2.04 | 1.79 |
| 21-Apr-25 | 3.25 | 38,100 | 2.21 | 0.29 | 0.57 | 2.21 | 1.95 |
| 21-Nov-25 | 0.25 | 22,000 | 2.37 | 0.29 | 0.59 | 2.37 | 2.10 |
| 21-Apr-26 | 4.25 | 38,100 | 2.41 | 0.28 | 0.59 | 2.41 | 2.14 |
| 21-Sep-26 | 0.50 | 32,800 | 2.48 | 0.27 | 0.58 | 2.48 | 2.22 |
| 21-Apr-27 | 4.75 | 33,900 | 2.50 | 0.26 | 0.57 | 2.50 | 2.25 |
| 21-Nov-27 | 2.75 | 29,700 | 2.56 | 0.25 | 0.56 | 2.56 | 2.32 |
| 21-May-28 | 2.25 | 29,700 | 2.59 | 0.23 | 0.54 | 2.59 | 2.37 |
| 21-Nov-28 | 2.75 | 32,600 | 2.62 | 0.23 | 0.54 | 2.62 | 2.41 |
| 21-Apr-29 | 3.25 | 33,000 | 2.64 | 0.22 | 0.53 | 2.64 | 2.43 |
| 21-Nov-29 | 2.75 | 33,400 | 2.67 | 0.21 | 0.52 | 2.67 | 2.47 |
| 21-May-30 | 2.50 | 36,600 | 2.71 | 0.21 | 0.53 | 2.71 | 2.50 |
| 21-Dec-30 | 1.00 | 24,700 | 2.74 | 0.21 | 0.53 | 2.74 | 2.54 |
| 21-Jun-31 | 1.50 | 37,300 | 2.75 | 0.20 | 0.53 | 2.75 | 2.55 |
| 21-Nov-31 | 1.00 | 21,000 | 2.76 | 0.20 | 0.53 | 2.76 | 2.57 |
| 21-May-32 | 1.25 | 33,200 | 2.78 | 0.20 | 0.53 | 2.78 | 2.58 |
| 21-Apr-33 | 4.50 | 19,800 | 2.79 | 0.20 | 0.53 | 2.79 | 2.60 |
| 21-Jun-35 | 2.75 | 9,550 | 2.89 | 0.19 | 0.49 | 2.89 | 2.71 |
| 21-Apr-37 | 3.75 | 12,000 | 2.95 | 0.18 | 0.45 | 2.95 | 2.78 |
| 21-Jun-39 | 3.25 | 10,300 | 3.05 | 0.16 | 0.41 | 3.05 | 2.88 |
| 21-May-41 | 2.75 | 13,500 | 3.11 | 0.15 | 0.39 | 3.11 | 2.95 |
| 21-Mar-47 | 3.00 | 13,300 | 3.18 | 0.13 | 0.37 | 3.18 | 3.15 |
| 21-Jun-51 | 1.75 | 15,000 | 3.19 | 0.13 | 0.37 | 3.19 | 3.03 |