Summary: ACGB bond yields fall in Australia; ACGB 10-year spread to US Treasury yield falls to -21bps; 10-year bond yields down in US, major European markets; $9 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields fell throughout the entire week. By the end of it, the 3-year ACGB yield had lost 15bps to 3.90%, the 10-year yield had shed 19bps to 4.23% while the 20-year yield finished 17bps lower at 4.54%. The spread between US and Australian 10-year Treasury bond yields fell from -8bps to -21bps.
Over in the US, 10-year bond yields fell heavily at the start of the week and continued to fall for the next couple of days. Yields stabilised and then shot up at the end of the week.
The ISM’s May reading of its manufacturing PMI came out at the start of the US week. The index slipped further below 50, from 49.2 to 48.7, below expectations and further in contractionary territory.
April’s JOLTS report was released the next day. Total quits and separations increased while openings decreased. The quit rate remained unchanged at 2.2% after revisions.
The ISM’s May non-manufacturing PMI was released midweek. The index rose from 49.4 to 53.8, above expectations.
At the end of the week, May’s non-farm payrolls report produced a rise in employment well above expectations. Even so, the jobless rate ticked up from 3.9% to 4.0% while the participation rate declined to 62.5%.
The New York Fed’s Nowcast model was also updated at the end of the week. The June 2024 quarter forecast was raised from 1.80% (annualised) to 1.90%.
By this point, the US 2-year Treasury bond yield had added 2bps to 4.89%, the 10-year yield had lost 6bps to 4.44% while the 30-year yield finished 9bps lower at 4.56%.
In major euro-zone markets, 10-year bond yields moved in a broadly-similar pattern to that of their US counterpart.
The ECB policy meeting on Thursday was the highlight of the euro-zone economic week. The ECB’s various policy rates were lowered by 25bps each, as largely expected given the meeting had been flagged as “live” after the May meeting.
By the end of the week, the German 10-year bund yield had shed 6bps to 2.61% and the French 10-year OAT yield had lost 3bps to 3.10%. The Italian 10-year BTP yield slipped 1bp to 3.95% over the week while the British 10-year gilt yield finished 7bps lower at 4.35%.
The AOFM skipped the usual bond tender this week. Instead it issued $7 billion of a new line of June 2034s via syndication at a yield of 4.295%. 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 $48.15 billion. There are currently $834.95 billion of Treasury bonds and $40.735 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.