Summary: 10-year bond yield up in Australia; ACGB 10-year spread to US Treasury yield rises to -1bp; 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 week with a modest gain which was immediately followed by a sizable fall. Yields then rose midweek, jumped significantly on Thursday before partially falling back at the end of the week. By this point, the 3-year ACGB yield had gained 11bps to 4.34%, the 10-year yield had added 6bps to 4.83% while the 20-year yield finished 4bps higher at 5.16%. The spread between US and Australian 10-year Treasury bond yields increased from -16bps to -1bp.
Over in the US, 10-year bond yields fell through much of the week with the exception of Wednesday when yields jumped.
S&P Global Market Intelligence’s latest flash reading of its composite index was released on Tuesday, with the index rising from September’s final reading of 50.2 to 51.0. The manufacturing index rose from 49.8 to 50.0 while the services index gained 0.8 to 50.9. S&P Global’s Chris Williamson said, “Hopes of a soft landing for the US economy will be encouraged by the improved situation seen in October.”
September quarter GDP figures were released on Thursday. The US economy expanded at an annualised rate of 4.9%, a faster pace than expected.
At the end of the week, the latest report on personal consumption expenditures indicated core PCE price inflation had increased by 0.3% in September and by 3.7% on an annual basis, down from 3.8% in August.
The US Fed’s Nowcast model was also updated at the end of the week. The December quarter GDP growth forecast was raised to 2.8% annualised, or a 0.7% expansion over the quarter. By this point, the US 2-year Treasury bond yield had lost 8bps to 5.03%, the 10-year yield had shed 9bps to 4.84% while the 30-year yield finished 7bps lower at 5.02%.
In major euro-zone markets, 10-year bond yields followed a similar pattern to their US counterpart, except the daily movements were smaller.
October’s consumer sentiment report was released at the start of the week. The index indicated euro-zone sentiment had deteriorated for a third consecutive month.
Germany’s ifo Institute released the October reading of its business climate index midweek. The index increased after five consecutive months of falls, as firms’ views of current conditions and the short-term outlook both improved.
S&P Global Market Intelligence released its October flash PMI figures for the euro-zone some hours before the US figures on Tuesday. The preliminary reading of the composite index was 46.5, down from September’s final reading of 47.2. Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said “…things are moving from bad to worse.”
The Governing Council of the ECB held its October policy meeting the next day. As expected, the ECB maintained current settings for its three policy rates.
By the end of the week, the German 10-year bund yield had lost 6bps to 2.83%, as had the French 10-year OAT yield to 3.46%. The Italian 10-year BTP yield decreased by 12bps over the week to 4.80% while the British 10-year gilt yield finished 10bps lower at 4.71%.
The AOFM held one bond tender this week; $800 million of September 2026s were priced at a nominal yield of 4.29%. 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 $19.75 billion. There are currently $842.75 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 $27.00 billion of short-term Treasury notes outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.39 | 0.07 | 0.26 | 4.40 | 4.30 |
| 21-Nov-24 | 0.25 | 41,300 | 4.48 | 0.11 | 0.30 | 4.48 | 4.35 |
| 21-Apr-25 | 3.25 | 41,500 | 4.43 | 0.08 | 0.31 | 4.44 | 4.28 |
| 21-Nov-25 | 0.25 | 39,200 | 4.38 | 0.10 | 0.33 | 4.39 | 4.21 |
| 21-Apr-26 | 4.25 | 39,600 | 4.32 | 0.11 | 0.29 | 4.34 | 4.16 |
| 21-Sep-26 | 0.50 | 38,600 | 4.31 | 0.11 | 0.28 | 4.33 | 4.14 |
| 21-Apr-27 | 4.75 | 36,700 | 4.33 | 0.11 | 0.30 | 4.35 | 4.16 |
| 21-Nov-27 | 2.75 | 32,200 | 4.37 | 0.11 | 0.33 | 4.39 | 4.20 |
| 21-May-28 | 2.25 | 31,700 | 4.41 | 0.10 | 0.36 | 4.44 | 4.25 |
| 21-Nov-28 | 2.75 | 34,800 | 4.45 | 0.10 | 0.38 | 4.48 | 4.29 |
| 21-Apr-29 | 3.25 | 36,600 | 4.49 | 0.09 | 0.40 | 4.53 | 4.34 |
| 21-Nov-29 | 2.75 | 34,700 | 4.54 | 0.09 | 0.41 | 4.58 | 4.40 |
| 21-May-30 | 2.50 | 37,100 | 4.60 | 0.08 | 0.42 | 4.64 | 4.46 |
| 21-Dec-30 | 1.00 | 38,700 | 4.65 | 0.08 | 0.43 | 4.71 | 4.52 |
| 21-Jun-31 | 1.50 | 38,100 | 4.69 | 0.08 | 0.44 | 4.75 | 4.57 |
| 21-Nov-31 | 1.00 | 21,000 | 4.73 | 0.07 | 0.46 | 4.78 | 4.60 |
| 21-May-32 | 1.25 | 39,300 | 4.76 | 0.07 | 0.47 | 4.82 | 4.63 |
| 21-Nov-32 | 1.75 | 29,000 | 4.79 | 0.07 | 0.47 | 4.85 | 4.67 |
| 21-Apr-33 | 4.50 | 25,100 | 4.79 | 0.07 | 0.47 | 4.85 | 4.67 |
| 21-Nov-33 | 3.00 | 22,500 | 4.81 | 0.07 | 0.47 | 4.87 | 4.69 |
| 21-May-34 | 3.75 | 18,800 | 4.83 | 0.07 | 0.48 | 4.89 | 4.70 |
| 21-Dec-34 | 3.50 | 17,000 | 4.85 | 0.07 | 0.48 | 4.91 | 4.73 |
| 21-Jun-35 | 2.75 | 13,850 | 4.88 | 0.06 | 0.48 | 4.94 | 4.76 |
| 21-Apr-37 | 3.75 | 12,300 | 4.96 | 0.06 | 0.49 | 5.02 | 4.84 |
| 21-Jun-39 | 3.25 | 10,300 | 5.07 | 0.06 | 0.50 | 5.13 | 4.95 |
| 21-May-41 | 2.75 | 14,300 | 5.14 | 0.05 | 0.51 | 5.20 | 5.03 |
| 21-Mar-47 | 3.00 | 14,200 | 5.20 | 0.04 | 0.50 | 5.27 | 5.09 |
| 21-Jun-51 | 1.75 | 19,600 | 5.19 | 0.04 | 0.47 | 5.26 | 5.08 |