Summary: 10-year bond yields modestly lower in Australia, up slightly in US, mostly down in major European markets; ACGB 10-year spread to US Treasury yield tightens from +12ps to +9bps; RBA buys $4 billion of various ACGBs & semis, purchases now total $265.5 billion; AOFM issues $3 billion worth of bonds, notes.
Sovereign 10-year bond yields finished the week modestly lower in Australia but slightly higher in the US. Yields in major European markets mostly declined.
Locally, long-term ACGB yields increased noticeably at the start of the week before sliding over much of the remainder. By the end of it, the 3-year ACGB yield had inched up 1bp to 1.29% while the 10-year yield had slipped 1bp to 1.88% and the 20-year yield had lost 2bps to 2.40%. The spread between US and Australia 10-year Treasury bond yields tightened from +12bps to +9bps.
The RBA purchased another $4.0 billion worth of various ACGBs and semis with maturities from November 2024 to April 2033 over the week. The RBA’s programme has now purchased $265.5 billion of bonds to date with a review set to take place next month.
Over in the US, long-term bond yields slid modestly for much of the week before rising strongly at the very end of it.
The first notable report of the US week was released midweek. December’s CPI report was close to market expectations, with the annual rate now above 7%.
December PPI figures were released the next day. The 0.2% increase was less than expected and one ANZ economist thought there may be “some indications” prices may be near their peak.
The weekly initial jobless claims report was released on the same day. Total claims amounted to 0.230 million for the week to Saturday 8 January, 23,000 more claims than in the previous week after revisions. As at 1 January, continuing claims (seasonally adjusted) totalled 1.559 million, a 194,000 fall from the previous week’s total after revisions.
There were a trio of reports out at the end of the week. US industrial production contracted slightly in December, rather than expanding slightly as generally expected. US consumer sentiment remained soft in January, declining a bit more and to a level below the worst of 2020. The December retail sales report disappointed, falling by more than the expected small decline.
By this point, the US 2-year Treasury bond yield had added 10bps to 0.96%, the 10-year yield had gained 2bps to 1.79% while the 30-year yield finished unchanged at 2.12%.
In major euro-zone markets, 10-year bond yields declined modestly over much of the week before rising moderately at the end of it.
Midweek, euro-zone industrial production expanded by 2.3% in November, much better than the small increase which had been expected.
By the end of the week, the German 10-year bund yield had slipped 1bp to -0.05% and the French 10-year OAT yield had gained 4bps to 0.33%. The Italian 10-year BTP yield decreased by 6bps to 1.26% over the week while the British 10-year gilt yield finished 3bps lower at 1.08%.
The AOFM held two bond tenders during the week. $1 billion of November 2032s and $1 billion of November 2025s were priced at yields of 1.89% and 1.33% respectively. Their respective coverage ratios were 3.7 and 5.3.
There was also one Treasury note tender 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 $50.3 billion. There are currently $780.813 billion of Treasury bonds and $41.107 billion of Treasury index-linked bonds on issue. The next bond series to mature does so on 15 July when $24.763 billion worth of bonds are due. There are also $36.00 billion of short-term Treasury notes currently outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|
| 21-Nov-22 | 2.25 | 26,500 | 0.31 | 0.08 | 0.31 | 0.30 |
| 21-Apr-23 | 5.50 | 34,200 | 0.51 | 0.16 | 0.51 | 0.43 |
| 21-Apr-24 | 2.75 | 34,400 | 0.72 | 0.07 | 0.72 | 0.69 |
| 21-Nov-24 | 0.25 | 37,600 | 1.02 | 0.09 | 1.02 | 0.98 |
| 21-Apr-25 | 3.25 | 35,600 | 1.21 | 0.11 | 1.21 | 1.18 |
| 21-Nov-25 | 0.25 | 22,000 | 1.36 | 0.12 | 1.36 | 1.33 |
| 21-Apr-26 | 4.25 | 37,100 | 1.39 | 0.12 | 1.39 | 1.37 |
| 21-Sep-26 | 0.50 | 31,800 | 1.47 | 0.14 | 1.48 | 1.45 |
| 21-Apr-27 | 4.75 | 33,900 | 1.51 | 0.14 | 1.52 | 1.49 |
| 21-Nov-27 | 2.75 | 29,700 | 1.57 | 0.14 | 1.59 | 1.56 |
| 21-May-28 | 2.25 | 29,700 | 1.63 | 0.16 | 1.66 | 1.62 |
| 21-Nov-28 | 2.75 | 32,100 | 1.67 | 0.18 | 1.71 | 1.67 |
| 21-Apr-29 | 3.25 | 33,000 | 1.69 | 0.18 | 1.74 | 1.69 |
| 21-Nov-29 | 2.75 | 32,900 | 1.74 | 0.18 | 1.79 | 1.74 |
| 21-May-30 | 2.50 | 36,600 | 1.77 | 0.19 | 1.83 | 1.77 |
| 21-Dec-30 | 1.00 | 24,700 | 1.81 | 0.20 | 1.87 | 1.81 |
| 21-Jun-31 | 1.50 | 36,300 | 1.82 | 0.19 | 1.89 | 1.82 |
| 21-Nov-31 | 1.00 | 21,000 | 1.83 | 0.20 | 1.90 | 1.83 |
| 21-May-32 | 1.25 | 30,200 | 1.85 | 0.20 | 1.92 | 1.85 |
| 21-Apr-33 | 4.50 | 18,800 | 1.86 | 0.20 | 1.93 | 1.86 |
| 21-Jun-35 | 2.75 | 8,550 | 2.02 | 0.17 | 2.09 | 2.02 |
| 21-Apr-37 | 3.75 | 12,000 | 2.14 | 0.15 | 2.21 | 2.14 |
| 21-Jun-39 | 3.25 | 9,900 | 2.27 | 0.13 | 2.35 | 2.27 |
| 21-May-41 | 2.75 | 13,000 | 2.38 | 0.14 | 2.45 | 2.38 |
| 21-Mar-47 | 3.00 | 13,300 | 2.49 | 0.14 | 2.53 | 2.49 |
| 21-Jun-51 | 1.75 | 15,000 | 2.49 | 0.14 | 2.57 | 2.49 |