Summary: ACGB bond yields down in Australia; ACGB 10-year spread to US Treasury yield falls to -3bps; 10-year bond yields down in US, major European markets; $2.8 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields started the shortened week with a fall which set the tone for much of the week. By the end of it, the 3-year ACGB yield had shed 22bps to 3.52%, the 10-year yield had lost 25bps to 3.99% while the 20-year yield finished 26bps lower at 4.31%. The spread between US and Australian 10-year Treasury bond yields fell from 10bps to -3bps.
Over in the US, 10-year bond yields fell through the week with the exception of Friday when yields jumped.
December’s JOLTS report was released on Tuesday. Total quits and separations fell, openings increased and the quit rate remained steady.
The latest reading of The Conference Board’s Consumer Confidence Index also came out. Confidence improved again, a third consecutive month of gains for the index.
The FOMC two-day meeting ended the next day, leaving its target range for the federal funds rate unchanged.
The ISM’s January reading of its PMI came out on Thursday, above expectations, but still slightly below an expansionary level.
At the end of the week, January’s non-farm payrolls report produced a rise in employment well in in excess of expectations. The jobless rate remained steady at 3.7%, as did the participation rate at 62.5%.
The US Fed’s Nowcast model was also updated as usual. The March 2024 quarter forecast was raised from 2.8% to 3.3%.
By this point, the US 2-year Treasury bond yield had added 3bps to 4.36%, the 10-year yield had lost 12bps to 4.02% while the 30-year yield finished 15bps lower at 4.22%.
In major euro-zone markets, 10-year bond yields followed a broadly similar path their US counterpart.
The “flash” January consumer price index (CPI) report was released on Thursday. It produced an annual inflation rate of 2.8% for the euro-zone, slightly above expectations. Annual core CPI slowed from 3.4% to 3.3%.
By the end of the week, the German 10-year bund yield had lost 6bps to 2.24% while the French 10-year OAT yield shed 4bps to 2.74%. The Italian 10-year BTP yield slipped 1bp to 3.80% over the week while the British 10-year gilt yield finished 5bps lower at 4.12%.
The AOFM held the usual vanilla bond tender this week; $800 million of May 2034s were priced at a nominal yield of 3.98%. 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 buy-backs or short-term Treasury note tenders) is $27.1 billion. There are currently $849.85 billion of Treasury bonds and $40.686 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 $29.00 billion of short-term Treasury notes outstanding.