Summary: ACGB bond yields fall in Australia; ACGB 10-year spread to US Treasury yield falls to -20bps; 10-year bond yields down in US, major European markets; $2.95 billion of bonds, notes issued by AOFM; around $90 billion to be issued in 2024/2025.
Locally, long-term ACGB yields typically moved modestly up or down through much of the week with the exception of Thursday when yields dropped substantially. By the end of the week, the 3-year ACGB yield had lost 12bps to 3.84% while 10-year and 20-year yields both finished 11bps lower at 4.22% and 4.52% respectively. The spread between US and Australian 10-year Treasury bond yields fell from -17bps to -20bps.
Over in the US, 10-year bond yields fell from the beginning of the week and quite so substantially on Wednesday. Yields then partially retraced over the following two days.
April producer price indices were released on Tuesday. Headline PPI increased by 0.5% over the month, more than expected, and the annual growth rate accelerated to 2.4%.
April CPI figures came out the next day. Headline CPI increased by 0.3%, in line with expectations. The annual inflation rate slowed from 3.5% to 3.4% while the core inflation rate slowed from 3.8% to 3.6%.
April’s retail sales report was also released. Total sales remained unchanged after rounding, less than expected as well as March’s 0.6% rise.
April industrial production figures were released on Thursday. Industrial production was flat over the month, less than expected.
The Conference Board’s April reading of its Leading Index posted a 0.6% fall on Friday, another one to add to the others which preceded it.
The New York Fed’s Nowcast model was also updated as usual. The June 2024 quarter forecast was lowered from 2.2% (annualised) to 1.9%.
By this point, the US 2-year Treasury bond yield had lost 4bps to 4.83% while 10-year and 30-year yields both finished 8bps lower at 4.42% and 4.56% respectively.
In major euro-zone markets, 10-year bond yields followed a similar pattern to their US counterpart with the exception of Tuesday when euro-zone yields rose.
Germany’s ZEW May survey was published on Tuesday and it indicated the ZEW Economic Sentiment index had increased from April’s reading of 42.9 to 47.1. ZEW’s current conditions index also rose, from -79.2 to -72.3. “Signs of an economic recovery are growing, bolstered by better assessments of the overall eurozone and of China as a key export market.”
The euro-zone’s March industrial production figures were released the next day. Output rose by 0.6% over the month, more than the 0.6% rise which had been generally expected. However, output was still 1.0% lower than in March 2023.
By the end of the week, German and French 10-year yields had both slipped 1bp to 2.51% and 2.99% respectively. The Italian 10-year BTP yield lost 2bps to 3.80% over the week while the British 10-year gilt yield finished 3bps lower at 4.23%.
The AOFM held an index-linked bond tend in addition to the usual vanilla bond tender this week. $150 million of November 2032 ILBs were priced at a real yield of 1.92% while $800 million of June 2035s were priced at a nominal yield of 4.35%. There were also two Treasury note tenders which raised $2.0 billion on a short-term basis.
The AOFM announced the day after the Budget it expects to issue around $90 billion of Treasury bonds in the 2024/2025 financial year, along with between $2 billion and $5 billion of is Treasury Indexed Bonds.
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 $38.50 billion. There are currently $825.45 billion of Treasury bonds and $40.585 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 $29.00 billion of short-term Treasury notes outstanding.