Summary: ACGB bond yields rise in Australia; ACGB 10-year spread to US Treasury yield rises to -8bps; 10-year bond yields up in US, major European markets; $3.45 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields moved modestly lower through the early part of the week before jumping significantly midweek. Yields then moved a touch higher in net terms over the remaining two days. By the end of the week, the 3-year ACGB yield had added 7bps to 4.05%, the 10-year yield had gained 10bps to 4.42% while the 20-year yield finished 9bps higher at 4.71%. The spread between US and Australian 10-year Treasury bond yields rose from -15bps to -8bps.
Over in the US, 10-year bond yields rose noticeably for the first two days of the shortened week before falling back over the remaining days.
The latest reading of The Conference Board’s Consumer Confidence Index came out on Tuesday. Confidence improved In May, with the index back above the long-term average.
The latest report on personal consumption expenditures was released at the end of the week. Core PCE price inflation increased by 0.2% in April and by 2.8% on an annual basis, unchanged from March.
The New York Fed’s Nowcast model was also updated at the end of the week. The June 2024 quarter forecast was lowered from 2.0% (annualised) to 1.8%.
By this point, the US 2-year Treasury bond yield had lost 8bps to 4.87%, the 10-year yield had added 3bps to 4.50% while the 30-year yield finished 8bps higher at 4.65%.
In major euro-zone markets, 10-year bond yield moved in a broadly-similar pattern to their US counterpart.
Germany’s ifo Institute released the May reading of its business climate index at the start of the week. The index remained steady after three consecutive months of increases. Firms’ views of current conditions slipped a little while their short-term outlook improved.
The latest reading of the euro-zone’s Economic Sentiment Indicator (ESI) was posted on Thursday. The index increased in May but remains under its long-term average. This indicator has a solid correlation with euro-zone GDP and it implied a year-to-May growth rate of 0.3%.
By the end of the week, the German 10-year bund yield had gained 9bps to 2.67% and the French 10-year OAT yield had added 7bps to 3.13%. The Italian 10-year BTP yield increased by 8bps to 3.96% over the week while the British 10-year gilt yield finished 6bps higher at 4.42%.
The AOFM held an index-linked bond (ILB) tender as well as two vanilla tenders this week. $150 million of June 2031 ILBs were priced at a real yield of 1.79% while $600 million of June 2031s and $700 million of November 2029s were priced at nominal yields of 4.21% and 4.117% 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 $41.15 billion. There are currently $827.95 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 $28.00 billion of short-term Treasury notes outstanding.