Summary: 10-year bond yield down in Australia; ACGB 10-year spread to US Treasury yield rises to 22bps; 10-year bond yields down in US, major European markets; $2.8 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields rose moderately over the first three days of the week before falling heavily on Thursday and somewhat more moderately on Friday. By this point, the 3-year ACGB yield had lost 4bps to 4.30%, the 10-year yield had shed 9bps to 4.74% while the 20-year yield finished 12bps lower at 5.04%. The spread between US and Australian 10-year Treasury bond yields increased from -1bp to +22bps.
Over in the US, 10-year bond yields rose moderately for the first two days, plunged midweek and then fell noticeably on Thursday and Friday.
Wednesday was a busy day for US data.
The ISM’s October PMI undershot expectations and fell further into contractionary territory.
September’s JOLTS report produced a steady US quit rate. Total quits and separations declined while openings were higher.
The ADP October report undershot market expectations again.
On top of all this, the FOMC meeting ended, although there was no change to its target range and the accompanying statement contained few changes.
At the end of the week, October’s non-farm payrolls report produced a rise in employment which was less than expected. The jobless rate ticked up to 3.9% while the participation rate slipped to 62.7%.
The ISM’s October Services PMI was also released. The index fell from 53.6 to 51.8, lower than expected.
The US Fed’s Nowcast model was updated as usual. The December quarter GDP growth forecast was lowered to 2.4% annualised, or a 0.6% expansion over the quarter.
By this point, the US 2-year Treasury bond yield had lost 16bps to 4.87% while 10-year and 30-year yields both finished 32bps lower at 4.52% and 4.70% respectively.
In major euro-zone markets, 10-year bond yields fell through the entire week.
The latest euro-zone’s Economic Sentiment Indicator (ESI) came out at the start of the week. The index slipped again in October, further under its long-term average. This indicator has a solid correlation with euro-zone GDP and it implied a year-to-October growth rate of -0.2%, unchanged from September.
The “flash” October consumer price index (CPI) report was released on Tuesday. It produced an annual inflation rate of 2.9% in the euro-zone, below expectations. Annual core CPI slowed from 4.5% to 4.2%.
September quarter GDP figures were released at the same time. The euro-zone economy contracted by 0.1%, slightly worse than expected. The annual growth rate slowed from 1.0% to 0.6%.
By the end of the week, the German 10-year bund yield had lost 19bps to 2.64% and the French 10-year OAT yield had shed 23bps to 3.23%. The Italian 10-year BTP yield dropped by 36bps over the week to 4.44% while the British 10-year gilt yield finished 25bps lower at 4.46%.
The AOFM held one bond tender this week; $800 million of April 2033s were priced at a nominal yield of 4.95%. 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 $20.55 billion. There are currently $843.55 billion of Treasury bonds and $40.286 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 $29.00 billion of short-term Treasury notes outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.39 | -0.01 | 0.19 | 4.43 | 4.39 |
| 21-Nov-24 | 0.25 | 41,300 | 4.48 | 0.00 | 0.26 | 4.54 | 4.48 |
| 21-Apr-25 | 3.25 | 41,500 | 4.42 | -0.01 | 0.24 | 4.51 | 4.42 |
| 21-Nov-25 | 0.25 | 39,200 | 4.34 | -0.04 | 0.26 | 4.46 | 4.34 |
| 21-Apr-26 | 4.25 | 39,600 | 4.29 | -0.03 | 0.21 | 4.42 | 4.29 |
| 21-Sep-26 | 0.50 | 38,600 | 4.27 | -0.04 | 0.20 | 4.41 | 4.27 |
| 21-Apr-27 | 4.75 | 36,700 | 4.29 | -0.04 | 0.20 | 4.43 | 4.29 |
| 21-Nov-27 | 2.75 | 32,200 | 4.31 | -0.05 | 0.22 | 4.46 | 4.31 |
| 21-May-28 | 2.25 | 31,700 | 4.35 | -0.07 | 0.23 | 4.50 | 4.35 |
| 21-Nov-28 | 2.75 | 34,800 | 4.38 | -0.08 | 0.23 | 4.54 | 4.38 |
| 21-Apr-29 | 3.25 | 36,600 | 4.41 | -0.08 | 0.23 | 4.59 | 4.41 |
| 21-Nov-29 | 2.75 | 34,700 | 4.46 | -0.08 | 0.24 | 4.65 | 4.46 |
| 21-May-30 | 2.50 | 37,100 | 4.51 | -0.08 | 0.23 | 4.71 | 4.51 |
| 21-Dec-30 | 1.00 | 38,700 | 4.56 | -0.09 | 0.23 | 4.77 | 4.56 |
| 21-Jun-31 | 1.50 | 38,100 | 4.60 | -0.09 | 0.23 | 4.82 | 4.60 |
| 21-Nov-31 | 1.00 | 21,000 | 4.64 | -0.09 | 0.23 | 4.86 | 4.64 |
| 21-May-32 | 1.25 | 39,300 | 4.67 | -0.09 | 0.23 | 4.89 | 4.67 |
| 21-Nov-32 | 1.75 | 29,000 | 4.70 | -0.09 | 0.24 | 4.92 | 4.70 |
| 21-Apr-33 | 4.50 | 25,900 | 4.70 | -0.09 | 0.24 | 4.92 | 4.70 |
| 21-Nov-33 | 3.00 | 22,500 | 4.72 | -0.09 | 0.24 | 4.94 | 4.72 |
| 21-May-34 | 3.75 | 18,800 | 4.73 | -0.09 | 0.24 | 4.96 | 4.73 |
| 21-Dec-34 | 3.50 | 17,000 | 4.76 | -0.09 | 0.24 | 4.98 | 4.76 |
| 21-Jun-35 | 2.75 | 13,850 | 4.78 | -0.10 | 0.24 | 5.01 | 4.78 |
| 21-Apr-37 | 3.75 | 12,300 | 4.86 | -0.10 | 0.23 | 5.09 | 4.86 |
| 21-Jun-39 | 3.25 | 10,300 | 4.96 | -0.11 | 0.24 | 5.20 | 4.96 |
| 21-May-41 | 2.75 | 14,300 | 5.03 | -0.11 | 0.25 | 5.27 | 5.03 |
| 21-Mar-47 | 3.00 | 14,200 | 5.08 | -0.12 | 0.23 | 5.34 | 5.08 |
| 21-Jun-51 | 1.75 | 19,600 | 5.06 | -0.12 | 0.21 | 5.32 | 5.06 |