Summary: ACGB bond yields fall in Australia; ACGB 10-year spread to US Treasury yield rises to -9bps; 10-year bond yields down in US, most major European markets; $2.15 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields jumped early in the shortened week only to fall over the three remaining days. By the end of the week, the 3-year ACGB yield had lost 8bps to 3.82%, the 10-year yield had shed 10bps to 4.13% while the 20-year yield finished 3bps lower at 4.51%. The spread between US and Australian 10-year Treasury bond yields rose from -21bps to -9bps.
Over in the US, 10-year bond yields rose modestly at the start of the week but then fell on each of the following four days.
May CPI figures came out midweek. Headline CPI was flat, slightly below expectations. The annual inflation rate slowed from 3.4% to 3.3% while the core inflation rate slowed from 3.6% to 3.4%.
May producer price indices were released the next day. Headline PPI decreased by 0.2% over the month, in contrast with expectations of a modest rise, and the annual growth rate slowed from 2.3% to 2.2%.
The University of Michigan’s June reading of its consumer sentiment index came out at the end of the week. It produced another lower figure, below expectations. Short-term inflation expectations remained steady.
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 2.0% to 2.1%.
By this point, the US 2-year Treasury bond yield had lost 18bps to 4.71%, the 10-year yield had shed 22bps to 4.22% while the 30-year yield finished 21bps lower at 4.35%.
In major euro-zone markets, 10-year bond yields moved in a broadly-similar pattern to that of their US counterpart. French yields were the exception.
By the end of the week, the German 10-year bund yield had shed 25bps to 2.36% while the French 10-year OAT yield had added 1bp to 3.11%. The Italian 10-year BTP yield lost 4bps to 3.91% over the week while the British 10-year gilt yield finished 21bps lower at 4.14%.
The AOFM skipped the usual bond tender again this week and held tenders for index-linked bonds only. $100 million of August 2035 ILBs and $50 million of February 2050s were priced at real yields of 1.97% and 2.20% 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 $48.30 billion. There are currently $834.95 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 $28.00 billion of short-term Treasury notes outstanding.