Summary: 10-year bond yield down in Australia; ACGB 10-year spread to US Treasury yield rises to +30bps; 10-year bond yields down in US, major European markets; $2.95 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields crept up at the start of the week before falling quite noticeably over the next two day. Yields then reversed course and move higher over the remaining two days of the week. By this point, the 3-year ACGB yield had shed 12bps to 4.08%, the 10-year yield had lost 6bps to 4.50% while the 20-year yield finished 2bps lower at 4.80%. The spread between US and Australian 10-year Treasury bond yields rose from 9bps to 30bps.
Over in the US, 10-year bond yields fell noticeably each day except for Thursday, with an especially large fall at the end of the week.
The Conference Board’s November reading of its Consumer Sentiment Index was released on Tuesday. The index rose after three consecutive months of falls and remains above its long-term average.
The latest report on personal consumption expenditures came out a couple of days later. Core PCE price inflation increased by 0.2% in October and by 3.5% on an annual basis, down from 3.% in September.
At the end of the week, the ISM’s November reading of its PMI missed expectations, registering no change from October’s reading.
The US Fed’s Nowcast model was also updated. The December quarter GDP growth forecast was raised from 2.2% to 2.3% annualised, or a 0.6% expansion over the quarter.
By this point, the US 2-year Treasury bond yield had shed 41bps to 4.54%, the 10-year yield had lost 27bps to 4.20% while the 30-year yield finished 21bps lower at 4.39%.
In major euro-zone markets, 10-year bond yields moved broadly in line with their US counterpart.
The latest euro-zone’s Economic Sentiment Indicator (ESI) came out midweek. The index increased in November but remained well under its long-term average. This indicator has a solid correlation with euro-zone GDP and it implied a year-to-November growth rate of 0.2%, up from 0.1% in October.
The “flash” November consumer price index (CPI) report was released the next day. It produced an annual inflation rate of 2.4% for the euro-zone, below expectations. Annual core CPI slowed from 4.2% to 3.6%.
By the end of the week, the German 10-year bund yield had shed 28bps to 2.36%, as had the French 10-year OAT yield to 2.92%. The Italian 10-year BTP yield lost 30bps to 4.09% while the British 10-year gilt yield finished 13bps lower at 4.31%.
The AOFM held two index-linked bond (ILB) tenders as well as the usual vanilla bond tender this week; $100 million of September 2030 ILBs and $50 million of February 2050 ILBs were priced at real yields of 1.77% and 2.22% respectively while $800 million of December 2034s were priced at a nominal yield of 4.48%. 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 $23.90 billion. There are currently $846.75 billion of Treasury bonds and $40.586 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.