Summary: ACGB bond yields rise in Australia; ACGB 10-year spread to US Treasury yield falls to -8bps; 10-year bond yields up in US, major European markets; $3.5 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields hardly changed until Wednesday. Yields then jumped midweek after the release of local inflation figures and again the next day before reversing course at the end of the week. By this point, the 3-year ACGB yield had gained 17bps to 4.05%, the 10-year yield had added 10bps to 4.32% while the 20-year yield finished 7bps higher at 4.61%. The spread between US and Australian 10-year Treasury bond yields fell from -3bps to -8bps.
Over in the US, 10-year bond yields dipped at the start of the week, reversed the next day and then moved noticeably higher midweek. Yields fell moderately on Thursday before finishing the week with a significant rise.
The Conference Board’s June reading of its Consumer Confidence Index came out on Tuesday. Confidence deteriorated, with the index back a little closer to its long-term average.
The latest report on personal consumption expenditures was released at the end of the week. Core PCE price inflation increased by 0.1% in May and by 2.6% on an annual basis, down from 2.8% in April.
The New York Fed’s Nowcast model was also updated. The June 2024 quarter forecast remained at 1.90% (annualised), as did the September 2024 quarter forecast at 2.2%.
By this point, the US 2-year Treasury bond yield had added 3bps to 4.76%, the 10-year yield had gained 15bps to 4.40% while the 30-year yield finished 16bps higher at 4.56%.
In major euro-zone markets, 10-year bond yields moved modestly higher each day with the exception of Tuesday.
Germany’s ifo Institute released the June reading of its business climate index at the start of the week. The index slipped a little as German firms’ views of current conditions remained unchanged while their short-term outlook weakened.
By the end of the week, the German 10-year bund yield had gained 9bps to 2.50% while the French 10-year OAT yield had increased by 11bps to 3.25%. The Italian 10-year BTP yield gained 13bps to 4.07% over the week while the British 10-year gilt yield finished 8bps higher at 4.27%.
The AOFM held an index-linked bond (ILB) tender as well as two vanilla tenders this week. $100 million of November 2032 ILBs were priced at a real yield of 1.82% while $800 million of April 2033s and $600 million of December 2034s were priced at nominal yields of 3.94% and 4.22% respectively. There were also two Treasury note tenders which raised $2.0 billion on a short-term basis.
The gross value of all bonds issued by the AOFM in the 2023/2024 financial year (not taking into account short-term Treasury note tenders) is $51.30 billion. There are currently $837.85 billion of Treasury bonds and $40.985 billion of Treasury index-linked bonds on issue. The next series to mature does so on 21 November 2024 when $41.30 billion worth of bonds are due. There are also $28.00 billion of short-term Treasury notes outstanding.