Summary: ACGB bond yields up in Australia; ACGB 10-year spread to US Treasury yield rises to -25bps; 10-year bond yields up in US, UK, down in other major European markets; $2.8 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields jumped at the start of the week, then fell most of the way back over the following two days. Yields jumped again on Thursday and then steadied at the end of the week. By this point, the 3-year ACGB yield had added 18bps to 3.83%, the 10-year yield had gained 17bps to 4.28% while the 20-year yield finished 14bps higher at 4.56%. The spread between US and Australian 10-year Treasury bond yields moved from -29bps to -25bps.
Over in the US, 10-year bond yields see-sawed for most of the week with the exception of Wednesday when yields shot up sharply.
March’s CPI report was the first major US report of the week and it came out on Wednesday. Headline CPI increased by 0.4%, above with expectations. The annual inflation rate sped up from 3.2% to 3.5% while the core inflation rate slowed from 4.0% to 3.9%.
Minutes of the FOMC March meeting came out the same day. Almost all members expect rate cuts at some stage this year and there was some discussion of slowing the rate of Fed’s balance sheet reduction.
March’s producer price indices were released the next day. Headline PPI increased by 0.2% over the month, less than expected, but the annual growth rate accelerated to 2.1%.
The University of Michigan’s latest reading of its consumer sentiment index came out at the end of the week. Sentiment deteriorated slightly in April and inflation expectations rose slightly.
The US Fed’s Nowcast model was updated as usual. The March 2024 quarter forecast was lowered from 2.3% (annualised) to 2.2% while the June quarter forecast remained at 2.6%.
By this point, the US 2-year Treasury bond yield had added 15bps to 4.90%, the 10-year yield had gained 13bps to 4.53% while the 30-year yield finished 8bps higher at 4.63%.
In major euro-zone markets, 10-year bond yields followed broadly-similar patterns to their US counterpart except the midweek jump was smaller and yields fell quite hard on Friday.
It was a quiet week from a data point of view. However, the ECB Governing Council met on Thursday and left its various policy rates unchanged. However, June’s meeting was flagged as “live” for a rate cut.
By the end of the week, the German 10-year bund yield had lost 4bps to 2.36% while the French 10-year OAT yield had shed 5bps to 2.86%. The Italian 10-year BTP yield lost 6bps to 3.73% over the week while the British 10-year gilt yield finished 6bps higher at 4.24%.
The AOFM held one bond tender this week; $800 million of April 2027s were issued at a yield of 3.67%. There were the usual two Treasury note tenders as well 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 $33.55 billion. There are currently $857.35 billion of Treasury bonds and $40.435 billion of Treasury index-linked bonds on issue. The next series to mature does so on 21 April 2024 when $35.90 billion worth of bonds are due. There are also $26.00 billion of short-term Treasury notes outstanding.