Summary: 10-year bond yields substantially higher in Australia, the US, other major northern-hemisphere markets; ACGB 10-year spread to US Treasury yield narrows from +43bps to +40bps; AOFM issues $4.5 billion worth of bonds, notes.
Locally, long-term ACGB yields started the week with a modest decline before rising consistently through the week. By the end of it, the 3-year ACGB yield had added 25bps to 1.83%, the 10-year yield had gained 24bps to 2.40% while the 20-year yield finished 19bps higher at 2.83%. The spread between US and Australia 10-year Treasury bond yields narrowed from +43bps to +40bps.
Over in the US, long-term bond yields increased all through the week.
The first notable report of the US week was released on Wednesday. January’s JOLTS report indicated the US quit rate had declined while remaining close to its all-time high. Job openings fell while total separations rose.
The latest set of US consumer inflation figures was awaited with much anticipation until Thursday when it was released. February’s CPI report met market expectations, sending the annual rate to 7.9%, with one local economist saying “pressures are proving to be more persistent and expansive.”
The weekly initial jobless claims report was also released. Total claims amounted to 0.227 million for the week to Saturday 5 March, 11,000 more claims than in the previous week after revisions. As at 26 February, continuing claims (seasonally adjusted) totalled 1.494 million, a 25,000 rise from the previous week’s total after revisions.
At the end of the week, one of two major measures of US consumer sentiment softened a little further in March. The University of Michigan’s Consumer sentiment index fell from February’s final reading of 62.8 to 59.7.
By this point, US 2-year and 10-year Treasury bond yields had both jumped 27bps to 1.75% and 2.00% respectively while the 30-year yield finished 20bps higher at 2.36%.
In major euro-zone markets, 10-year bond yields rose noticeably each day until Friday when they declined modestly.
There was little of note with regards to economic reports and events save for the ECB Governing Council policy meeting on Thursday.
Polcy rates were left unchanged but the ECB announced the Pandemic Emergency Purhase Programme will end this month and the Asset Purchase Programme will be slowed in the June quarter and cease in the September quarter. Additionally, its 2022 inflation forecasts were raised from 3.2% to 5.1%.
By the end of the week, the German 10-year bund yield had increased by 32bps to 0.25% and the French 10-year OAT yield had gained 33bps to 0.74%. The Italian 10-year BTP yield added 34bps to 1.86% over the week while the British 10-year gilt yield finished 28bps higher at 1.49%.
The AOFM held two bond tenders during the week. $1 billion of November 2024s and $1 billion of November 2032s were priced at yields of 1.42% and 2.34% 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 $68.90 billion. There are currently $798.113 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 $34.50 billion of short-term Treasury notes currently outstanding.
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Nov-22 | 2.25 | 26,500 | 0.42 | 0.06 | 0.14 | 0.44 | 0.40 |
| 21-Apr-23 | 5.50 | 34,200 | 0.75 | 0.16 | 0.17 | 0.75 | 0.63 |
| 21-Apr-24 | 2.75 | 34,400 | 1.30 | 0.19 | 0.36 | 1.30 | 1.12 |
| 21-Nov-24 | 0.25 | 39,600 | 1.67 | 0.24 | 0.44 | 1.67 | 1.43 |
| 21-Apr-25 | 3.25 | 38,100 | 1.79 | 0.24 | 0.40 | 1.79 | 1.56 |
| 21-Nov-25 | 0.25 | 22,000 | 1.96 | 0.26 | 0.44 | 1.96 | 1.71 |
| 21-Apr-26 | 4.25 | 37,100 | 1.99 | 0.26 | 0.44 | 1.99 | 1.74 |
| 21-Sep-26 | 0.50 | 32,800 | 2.06 | 0.25 | 0.45 | 2.06 | 1.82 |
| 21-Apr-27 | 4.75 | 33,900 | 2.10 | 0.25 | 0.45 | 2.10 | 1.85 |
| 21-Nov-27 | 2.75 | 29,700 | 2.16 | 0.25 | 0.45 | 2.16 | 1.91 |
| 21-May-28 | 2.25 | 29,700 | 2.20 | 0.24 | 0.45 | 2.20 | 1.95 |
| 21-Nov-28 | 2.75 | 32,600 | 2.23 | 0.24 | 0.44 | 2.23 | 1.98 |
| 21-Apr-29 | 3.25 | 33,000 | 2.25 | 0.24 | 0.44 | 2.25 | 2.00 |
| 21-Nov-29 | 2.75 | 33,400 | 2.29 | 0.23 | 0.43 | 2.29 | 2.04 |
| 21-May-30 | 2.50 | 36,600 | 2.31 | 0.23 | 0.43 | 2.31 | 2.06 |
| 21-Dec-30 | 1.00 | 24,700 | 2.36 | 0.25 | 0.45 | 2.36 | 2.10 |
| 21-Jun-31 | 1.50 | 37,300 | 2.37 | 0.25 | 0.45 | 2.37 | 2.11 |
| 21-Nov-31 | 1.00 | 21,000 | 2.39 | 0.25 | 0.44 | 2.39 | 2.12 |
| 21-May-32 | 1.25 | 32,200 | 2.40 | 0.25 | 0.44 | 2.40 | 2.14 |
| 21-Apr-33 | 4.50 | 19,800 | 2.41 | 0.25 | 0.44 | 2.41 | 2.15 |
| 21-Jun-35 | 2.75 | 9,550 | 2.52 | 0.22 | 0.42 | 2.52 | 2.30 |
| 21-Apr-37 | 3.75 | 12,000 | 2.60 | 0.21 | 0.39 | 2.60 | 2.39 |
| 21-Jun-39 | 3.25 | 9,900 | 2.73 | 0.20 | 0.39 | 2.73 | 2.53 |
| 21-May-41 | 2.75 | 13,500 | 2.81 | 0.21 | 0.39 | 2.81 | 2.61 |
| 21-Mar-47 | 3.00 | 13,300 | 2.92 | 0.21 | 0.40 | 2.92 | 2.76 |
| 21-Jun-51 | 1.75 | 15,000 | 2.93 | 0.21 | 0.41 | 2.93 | 2.73 |