Summary:
ACGB yields generally rise; ACGB 10-year spread to US Treasury yield rises to -10bps; 10-year bond yields fall in US, major European markets; $1.5 billion of bonds issued by AOFM.
Locally, long-term ACGB yields remained remarkably steady for the first two days of the week and again at the end of the week. However, yields rose noticeably midweek only to reverse course and fall by a greater amount the next day. By the end of the week, the 3-year ACGB yield had added 2bps to 3.95%, the 10-year yield had lost 5bps to 4.53% while the 20-year yield finished 4bps lower at 4.96%. The spread between US and Australian 10-year Treasury bond yields rose to -10bps.
Over in the US, 10-year bond yields declined through much of the week.
December producer price indices were released on Tuesday. The headline PPI increased by 0.2% over the month, below expectations, although the annual growth rate still managed to accelerate from 3.0% to 3.3%. The core annual growth rate remained steady at 3.5%.
December CPI figures came out the next day. The headline CPI increased by 0.4%, in line with expectations, although the annual inflation rate still managed to rise from 2.7% to 2.9%. The annual core inflation rate slowed from 3.3% to 3.2%.
December retail sales figures were released on Thursday. Sales increased by 0.4% over the month, less than the 0.6% rise which had been generally expected as well as November’s 0.8% increase.
December industrial production figures came out at the end of the week. Production increased by 0.9%, more than expected, as utilities’ output increased and a Boeing strike ended.
The New York Fed’s Nowcast model was also updated as usual. The December 2024 quarter forecast was raised from 2.4% (annualised) to 2.6% while the March 2025 quarter forecast was raised from 2.7% (annualised) to 3.0%.
By this point, the US 2-year Treasury bond yield had lost 10bps to 4.28%, the 10-year yield had shed 13bps to 4.63% while the 30-year yield finished 8bps lower at 4.86%.
In major euro-zone markets, 10-year bond yields generally followed a similar pattern to their US counterpart.
The euro-zone’s November industrial production figures came out midweek. Output expanded by 0.2% over the month, in line with expectations, but still contracted by 1.9% when compared to December 2023.
By the end of the week, the German 10-year bund yield had lost 4bps to 2.53% while the French 10-year bond yield had shed 11bps to 3.31%. The Italian 10-year BTP yield fell 13bps to 3.64% over the week while the British 10-year gilt yield finished 19bps lower at 4.82%.
The AOFM held two bond tenders this week. $800 million of December 2034s and $700 million of November 2027s were priced at nominal yields of 4.64% and 3.92% respectively. There were also three Treasury note tenders which raised $3.0 billion on a short-term basis.
The gross value of all bonds issued by the AOFM in the 2024/2025 financial year (not taking into account short-term Treasury note tenders) is $50.50 billion. There are currently $845.25 billion of Treasury bonds and $42.685 billion of Treasury index-linked bonds on issue. The next series to mature does so on 21 April 2025 when $41.50 billion worth of bonds are due. There are also $33.00 billion of short-term Treasury notes outstanding.