Summary:
ACGB yields rise; ACGB 10-year spread to US Treasury yield steady at +18bps; 10-year bond yields rise in US, major European markets; no AOFM tenders during week.
Locally, long-term ACGB yields rose through the week with the exception of Thursday. By the end of the week, the 3-year ACGB yield had added 10bps to 3.93%, the 10-year yield had gained 16bps to 4.58% while the 20-year yield finished 18bps higher at 5.00%. The spread between US and Australian 10-year Treasury bond yields remained steady at -18bps.
Over in the US, 10-year bond yields rose consistently through the entire week with the exception of Thursday when yields slipped a little.
November’s JOLTS report was released on Tuesday. Quits and separations decreased but openings increased. The quit rate declined below 2%.
The ISM’s December reading of its non-manufacturing PMI was also released. The index increased from 52.1% in November to 54.1%.
Minutes of the FOMC December meeting were released midweek.
At the end of the week, December’s non-farm payrolls report produced another solid rise in employment, well above expectations. The participation rate remained steady at 62.5% while the jobless rate ticked down from 4.2% to 4.1%.
The University of Michigan’s January reading of its consumer sentiment index was also released. The index declined from December’s final figure of 74.0 to 73.2, slightly below expectations, and it remains at a subdued level from a historical perspective. Short-term inflation expectations increased from 3.0% to 3.3%.
The New York Fed’s Nowcast model was also updated as usual. The December 2024 quarter forecast was raised from 1.9% (annualised) to 2.4% while the March 2025 quarter forecast was raised from 2.2% (annualised) to 2.7%.
By this point, the US 2-year Treasury bond yield had added 10bps to 4.38%, the 10-year yield had increased by 16bps to 4.76% while the 30-year yield finished 13bps higher at 4.94%.
In major euro-zone markets, 10-year bond yields generally increased through the entire week.
The “flash” December consumer price index (CPI) report was released on Tuesday. Euro-zone CPI increased by 0.4% over the month and by 2.4% over the year, up from 2.2% in December. Annual core CPI remained steady at 2.7%.
The latest reading of the euro-zone’s Economic Sentiment Indicator (ESI) was posted the next day. The index decreased in December and remains noticeably under its long-term average. This indicator has a solid correlation with euro-zone GDP and it implied a year-to-December growth rate of 0.2%.
By the end of the week, the German 10-year bund yield had gained 15bps to 2.57% while the French 10-year bond yield had added 12bps to 3.42%. The Italian 10-year BTP yield rose by 17bps to 3.77% over the week while the British 10-year gilt yield finished 26bps higher at 4.95%.
The AOFM did not hold any bond tenders this week. There were no Treasury note tenders, either.
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 $49.00 billion. There are currently $843.75 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 $30.00 billion of short-term Treasury notes outstanding.