Summary: 10-year bond yield down in Australia; ACGB 10-year spread to US Treasury yield rises to -15bps; 10-year bond yields down in US, major European markets; $2.9 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields started the week with a modest decline. More falls followed until Friday when there was a substantial rise. By this point, the 3-year ACGB yield had lost 6bps to 3.95%, the 10-year yield had shed 9bps to 4.47% while the 20-year yield finished 6bps lower at 4.82%. The spread between US and Australian 10-year Treasury bond yields increased from -24bps to -15bps.
Over in the US, 10-year bond yields started the shortened week with a couple of days of significant falls. Yields then rebounded just a s robustly only to finish the week with another material fall.
September producer price indices (PPI) were released midweek. The index increased by 0.5% over the month, more than expected, and the annual growth rate accelerated to 2.2%.
Minutes of the FOMC September meeting also came out.
September’s CPI report was released the next day and it produced a 0.4% increase, slightly above expectations. The annual inflation rate remained steady at 3.7% while the core inflation rate slowed to 4.1%.
The latest reading of the University of Michigan’s Consumer Sentiment index came out at the end of the week and indicated respondents had become more pessimistic in October.
The US Fed’s Nowcast model was also updated. 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 was raised from 2.4% annualised to 2.5%.
By this point, the US 2-year Treasury bond yield had lost 3bps to 5.05%, the 10-year yield had shed 18bps to 4.62% while the 30-year yield finished 21bps lower at 4.76%.
In major euro-zone markets, 10-year bond yields followed a broadly-similar path to their US counterpart, except the significant falls took place at the start of the week when the US was closed.
Minutes of the ECB’s September meeting were released on Thursday.
The euro-zone’s August industrial production figures were released at the end of the week. Output expanded by 0.6% over the month, more than expected.
By this point, the German 10-year bund yield had shed 15bps to 2.73% and the French 10-year OAT yield had lost 12bps to 3.36%. The Italian 10-year BTP yield decreased by 18bps over the week to 4.75% while the British 10-year gilt yield finished 19bps lower at 4.53%.
The AOFM held an index-linked bond (ILB) tender as well as the now-usual vanilla bond tender this week; $100 million of August 2035s were priced at a real yield of 1.92% and $800 million of November 2027s were priced at a nominal yield of 3.96%. 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 $10.95 billion. There are currently $833.95 billion of Treasury bonds and $40.186 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 $27.50 billion of short-term Treasury notes outstanding after $3.5 billion matured on Friday.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.19 | 0.01 | 0.17 | 4.19 | 4.15 |
| 21-Nov-24 | 0.25 | 41,300 | 4.19 | 0.04 | 0.18 | 4.19 | 4.11 |
| 21-Apr-25 | 3.25 | 41,500 | 4.10 | 0.00 | 0.21 | 4.10 | 4.06 |
| 21-Nov-25 | 0.25 | 39,200 | 4.03 | 0.01 | 0.22 | 4.03 | 3.95 |
| 21-Apr-26 | 4.25 | 39,600 | 3.95 | -0.05 | 0.17 | 3.96 | 3.92 |
| 21-Sep-26 | 0.50 | 37,800 | 3.94 | -0.05 | 0.16 | 3.95 | 3.91 |
| 21-Apr-27 | 4.75 | 36,700 | 3.95 | -0.05 | 0.17 | 3.96 | 3.91 |
| 21-Nov-27 | 2.75 | 32,200 | 3.98 | -0.05 | 0.20 | 3.99 | 3.94 |
| 21-May-28 | 2.25 | 31,700 | 4.02 | -0.05 | 0.22 | 4.03 | 3.97 |
| 21-Nov-28 | 2.75 | 34,800 | 4.06 | -0.05 | 0.24 | 4.07 | 4.01 |
| 21-Apr-29 | 3.25 | 36,600 | 4.11 | -0.05 | 0.25 | 4.12 | 4.05 |
| 21-Nov-29 | 2.75 | 34,700 | 4.16 | -0.06 | 0.27 | 4.18 | 4.10 |
| 21-May-30 | 2.50 | 37,100 | 4.22 | -0.05 | 0.30 | 4.25 | 4.15 |
| 21-Dec-30 | 1.00 | 38,700 | 4.29 | -0.05 | 0.31 | 4.32 | 4.21 |
| 21-Jun-31 | 1.50 | 38,100 | 4.33 | -0.06 | 0.33 | 4.37 | 4.25 |
| 21-Nov-31 | 1.00 | 21,000 | 4.37 | -0.07 | 0.34 | 4.41 | 4.28 |
| 21-May-32 | 1.25 | 39,300 | 4.40 | -0.07 | 0.35 | 4.45 | 4.31 |
| 21-Nov-32 | 1.75 | 29,000 | 4.44 | -0.08 | 0.36 | 4.49 | 4.34 |
| 21-Apr-33 | 4.50 | 25,100 | 4.44 | -0.08 | 0.37 | 4.49 | 4.34 |
| 21-Nov-33 | 3.00 | 22,500 | 4.46 | -0.08 | 0.38 | 4.52 | 4.37 |
| 21-May-34 | 3.75 | 18,800 | 4.48 | -0.08 | 0.38 | 4.53 | 4.38 |
| 21-Dec-34 | 3.50 | 17,000 | 4.50 | -0.07 | 0.39 | 4.56 | 4.41 |
| 21-Jun-35 | 2.75 | 13,850 | 4.53 | -0.07 | 0.39 | 4.58 | 4.43 |
| 21-Apr-37 | 3.75 | 12,300 | 4.62 | -0.06 | 0.39 | 4.67 | 4.52 |
| 21-Jun-39 | 3.25 | 10,300 | 4.72 | -0.06 | 0.39 | 4.77 | 4.62 |
| 21-May-41 | 2.75 | 14,300 | 4.80 | -0.05 | 0.39 | 4.84 | 4.69 |
| 21-Mar-47 | 3.00 | 14,200 | 4.87 | -0.05 | 0.40 | 4.91 | 4.76 |
| 21-Jun-51 | 1.75 | 19,600 | 4.87 | -0.06 | 0.40 | 4.92 | 4.76 |