Summary: ACGB bond yields rise in Australia; ACGB 10-year spread to US Treasury yield rises to -3bps; 10-year bond yields up in US, major European markets; $3.5 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields slipped a little the start of the week but then rose by moderate amounts for the next three days before steadying. By the end of the week, the 3-year ACGB yield had added 6bps to 3.88%, the 10-year yield had gained 9bps to 4.22% while the 20-year yield finished 3bps higher at 4.54%. The spread between US and Australian 10-year Treasury bond yields rose from -9bps to -3bps.
Over in the US, 10-year bond yields rose at the start of the week, reversed the next day and then moved cautiously for the remainder of the week.
May’s retail sales report was released on Tuesday. Total sales increased a touch, less than expected, but up from April’s downwardly revised 0.3% fall.
May industrial production figures were also posted. Production jumped 0.9% over the month, more than expected.
The Conference Board’s May reading of its Leading Index posted a 0.5% fall on Friday, another decline in a long list of them since early 2022.
S&P Global Market Intelligence’s flash June reading of its US composite index came that same day, posting a small rise from 54.5 in May to 54.6. The manufacturing index increased from 51.3 to 51.7 while the services index increased by 0.3 to 55.1. S&P Global Market Intelligence Chief Business Economist Chris Williamson said the figures hint “at an encouragingly robust end to the second quarter” and indicate “inflation pressures have cooled.”
The New York Fed’s Nowcast model was also updated. The June 2024 quarter forecast remained at 1.90% (annualised) while the September 2024 quarter forecast was raised from 2.1% to 2.2%.
By this point, the US 2-year Treasury bond yield had added 2bps to 4.73%, the 10-year yield had gained 3bps to 4.25% while the 30-year yield finished 5bps higher at 4.40%.
In major euro-zone markets, 10-year bond yields moved in a broadly-similar pattern to that of their US counterpart.
Germany’s ZEW June survey was published on Tuesday and it indicated the ZEW Economic Sentiment index had increased from May’s reading of 47.1 to 47.5. ZEW’s current conditions index declined, however, from -72.3 to -73.8. “Both the sentiment and the situation indicators stagnate.”
June’s euro-zone consumer sentiment report was released a couple of days later. The index indicated sentiment had improved modestly again, although the index is still well below its long-term average.
S&P Global Market Intelligence released its flash June PMI figures for the euro-zone at the end of the week. The preliminary reading of the composite index was 50.8, down from May’s final reading of 52.2. Hamburg Commercial Bank Chief Economist Dr. Cyrus de la Rubia said a “rapid decline in new orders suggests that a recovery may be further off than initially expected.”
By this point, the German 10-year bund yield had gained 5bps to 2.41% while the French 10-year OAT yield had added 3bps to 3.14%. The Italian 10-year BTP yield also gained 3bps, to 3.94%, over the week while the British 10-year gilt yield finished 5bps higher at 4.19%.
The AOFM held two bond tenders this week; $800 million of June 2035s and $700 million of June 2031s were priced at yields of 4.18% and 4.10% respectively. There were also the usual 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 $49.80 billion. There are currently $836.45 billion of Treasury bonds and $40.885 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 $26.00 billion of short-term Treasury notes outstanding.