Summary: ACGB bond yields up in Australia; ACGB 10-year spread to US Treasury yield falls to -16bps; 10-year bond yields up in US, major European markets; $2.0 billion of notes issued by AOFM.
Locally, long-term ACGB yields fell moderately at the start of the week and then reversed course to rise through the remainder. By the end of the week, the 3-year ACGB yield had gained 15bps to 3.75%, the 10-year yield had added 16bps to 4.15% while the 20-year yield finished 15bps higher at 4.45%. The spread between US and Australian 10-year Treasury bond yields fell from -9bps to -16bps.
Over in the US, 10-year bond yields rose through the entire week.
February’s CPI report was the first major report of the week and it came out on Tuesday. Headline CPI increased by 0.4%, in line with expectations. The annual inflation rate sped up from 3.1% to 3.2% while the core inflation rate slowed from 3.9% to 3.8%.
February’s producer price indices were released a couple of days later along with February’s retail sales report. Headline PPI increased by 0.6% over the month, more than expected, and the annual growth rate accelerated to 1.6%. Total retail sales increased by 0.6% over the month, less than expected.
February industrial production figures and the latest reading of the University of Michigan’s Consumer Sentiment index were both released at the end of the week. Industrial production increased by 0.1% over the month, slightly more than expected, while the annual contraction rate slowed from 0.3% to 0.2%. UoM consumer sentiment deteriorated slightly again in March while inflation expectations remained unchanged.
The US Fed’s Nowcast model was also updated as usual. The March 2024 quarter forecast was lowered from 2.1% (annualised) to 1.8% while the June quarter forecast was lowered from 2.5% to 2.1%.
By this stage, the US 2-year Treasury bond yield had gained 26bps to 4.73%, the 10-year yield had added 23bps to 4.31% while the 30-year yield finished 18bps higher at 4.43%.
In major euro-zone markets, 10-year bond yields followed a similar pattern to their US counterpart and rose through the entire week.
The euro-zone’s January industrial production figures were released midweek. Output dropped by 3.2% over the month, a larger fall than expected. Output was 6.7% lower than in January 2023.
By the end of the week, the German 10-year bund yield had gained 18bps to 2.44% while the French 10-year OAT yield had added 16bps to 2.87%. The Italian 10-year BTP yield increased by 12bps to 3.69% over the week while the British 10-year gilt yield finished 14bps higher at 4.20%.
The AOFM did not hold any bond tenders this week and there were just 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 buy-backs or short-term Treasury note tenders) is $31.40 billion. There are currently $853.85 billion of Treasury bonds and $40.986 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 $28.00 billion of short-term Treasury notes outstanding.