Summary: 10-year bond yield up in Australia; ACGB 10-year spread to US Treasury yield falls to -16bps; 10-year bond yields up in US, major European markets; $9.5 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields started the week with a modest decline. Yields then rose noticeably each day until the end of the week when yields decline moderately. By this point, the 3-year ACGB yield had gained 28bps to 4.23% while 10-year and 20-year yields both finished 30bps higher at 4.77% and 5.12% respectively. The spread between US and Australian 10-year Treasury bond yields decreased from -15bps to -16bps.
Over in the US, 10-year bond yields increased noticeably through the week until Friday when yields fell back somewhat.
Industrial production numbers for September were released on Tuesday. They indicated production had increased by 0.3%, in contrast with the modest contraction which had been expected.
September’s retail sales report was also released and it indicated total sales had increased by 0.6% over the month, more than expected. “Non-store retailer” sales had the largest effect on the overall result.
The Conference Board’s September reading of its Leading Index posted a 0.7% fall on Thursday, its seventeenth consecutive fall.
The US Fed’s Nowcast model was updated at the end of the week. The September quarter GDP growth forecast was maintained at 2.5% annualised, or a 0.6% expansion over the quarter. Its estimate of December quarter’s GDP growth remained unchanged after rounding at 2.3%.
By this point, the US 2-year Treasury bond yield had added 6bps to 5.11%, the 10-year yield had gained 31bps to 4.93% while the 30-year yield finished 33bps higher at 5.09%.
In major euro-zone markets, 10-year bond yields followed a broadly-similar path to their US counterpart, except for Thursday when yields either remained steady or declined a little.
Germany’s ZEW October survey was published on Tuesday. It indicated its Economic Sentiment index had increased from September’s reading of -11.4 to -1.1. However, ZEW’s current conditions index slipped from -79.4 to -79.9.
By the end of the week, the German 10-year bund yield had gained 16bps to 2.89%, as had the French 10-year OAT yield to 3.52%. The Italian 10-year BTP yield increased by 17bps over the week to 4.92% while the British 10-year gilt yield finished 28bps higher at 4.81%.
The AOFM issued a new bond by syndication this week; $8 billion of June 2054s were priced at a nominal yield of 4.93%. There were also two Treasury note tenders which raised $1.5 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 $18.95 billion. There are currently $841.95 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 | 4.32 | 0.13 | 0.27 | 4.34 | 4.19 |
| 21-Nov-24 | 0.25 | 41,300 | 4.37 | 0.18 | 0.35 | 4.40 | 4.19 |
| 21-Apr-25 | 3.25 | 41,500 | 4.35 | 0.24 | 0.42 | 4.38 | 4.12 |
| 21-Nov-25 | 0.25 | 39,200 | 4.28 | 0.25 | 0.42 | 4.30 | 4.04 |
| 21-Apr-26 | 4.25 | 39,600 | 4.21 | 0.26 | 0.38 | 4.24 | 3.96 |
| 21-Sep-26 | 0.50 | 37,800 | 4.20 | 0.26 | 0.37 | 4.23 | 3.95 |
| 21-Apr-27 | 4.75 | 36,700 | 4.22 | 0.27 | 0.39 | 4.25 | 3.96 |
| 21-Nov-27 | 2.75 | 32,200 | 4.26 | 0.28 | 0.43 | 4.29 | 3.99 |
| 21-May-28 | 2.25 | 31,700 | 4.31 | 0.29 | 0.47 | 4.34 | 4.03 |
| 21-Nov-28 | 2.75 | 34,800 | 4.35 | 0.29 | 0.49 | 4.38 | 4.07 |
| 21-Apr-29 | 3.25 | 36,600 | 4.40 | 0.29 | 0.51 | 4.43 | 4.11 |
| 21-Nov-29 | 2.75 | 34,700 | 4.46 | 0.29 | 0.53 | 4.49 | 4.17 |
| 21-May-30 | 2.50 | 37,100 | 4.51 | 0.29 | 0.56 | 4.54 | 4.22 |
| 21-Dec-30 | 1.00 | 38,700 | 4.57 | 0.28 | 0.58 | 4.60 | 4.29 |
| 21-Jun-31 | 1.50 | 38,100 | 4.62 | 0.29 | 0.59 | 4.65 | 4.33 |
| 21-Nov-31 | 1.00 | 21,000 | 4.66 | 0.29 | 0.61 | 4.69 | 4.37 |
| 21-May-32 | 1.25 | 39,300 | 4.69 | 0.29 | 0.62 | 4.73 | 4.40 |
| 21-Nov-32 | 1.75 | 29,000 | 4.72 | 0.29 | 0.64 | 4.76 | 4.43 |
| 21-Apr-33 | 4.50 | 25,100 | 4.72 | 0.29 | 0.63 | 4.76 | 4.43 |
| 21-Nov-33 | 3.00 | 22,500 | 4.75 | 0.28 | 0.64 | 4.78 | 4.46 |
| 21-May-34 | 3.75 | 18,800 | 4.76 | 0.29 | 0.65 | 4.80 | 4.47 |
| 21-Dec-34 | 3.50 | 17,000 | 4.78 | 0.28 | 0.65 | 4.82 | 4.50 |
| 21-Jun-35 | 2.75 | 13,850 | 4.81 | 0.29 | 0.65 | 4.85 | 4.52 |
| 21-Apr-37 | 3.75 | 12,300 | 4.90 | 0.28 | 0.65 | 4.93 | 4.61 |
| 21-Jun-39 | 3.25 | 10,300 | 5.01 | 0.29 | 0.66 | 5.04 | 4.71 |
| 21-May-41 | 2.75 | 14,300 | 5.09 | 0.29 | 0.67 | 5.11 | 4.77 |
| 21-Mar-47 | 3.00 | 14,200 | 5.15 | 0.28 | 0.66 | 5.17 | 4.84 |
| 21-Jun-51 | 1.75 | 19,600 | 5.15 | 0.28 | 0.64 | 5.17 | 4.83 |