Summary: 10-year bond yield up in Australia; ACGB 10-year spread to US Treasury yield falls to -24bps; 10-year bond yields up in US, major European markets; $2.8 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields started the week quietly, increased noticeably over the next two days before falling back in the final two days of the week. By this point, the 3-year ACGB yield had lost 8bps to 4.01% while 10-year and 20-year yields both finished 6bps higher at 4.56% and 4.88% respectively. The spread between US and Australian 10-year Treasury bond yields decreased from -8bps to -24bps.
Over in the US, 10-year bond yields increased strongly for the first two days of the week, then partially retraced over the next two days before rising strongly at the end of the week.
The ISM’s September PMI report was released at the start of the week. The index rose again but remained in contractionary territory.
August’s JOLTS report came out on Tuesday and it indicated the US quit rate remained steady. Total quits, separations and openings were all higher.
The next day, the ADP September report undershot market expectations again.
The ISM’s September Services PMI was released on Thursday. The index fell from 54.5 to 53.6, essentially in line with expectations.
At the end of the week, September’s non-farm payrolls report produced a rise in employment which was double expectations. However, the jobless rate remained unchanged at 3.8% as did the participation rate at 62.8%.
The US Fed’s Nowcast model was also updated. The September quarter GDP growth forecast was raised from 2.1% to 2.5% annualised, or a 0.6% expansion over the quarter. Its estimate of December quarter’s GDP growth was also raised from 2.0% annualised to 2.4%.
By this point, the US 2-year Treasury bond yield had added 3bps to 5.08%, the 10-year yield had gained 22bps to 4.80% while the 30-year yield finished 27bps higher at 4.97%.
In major euro-zone markets, 10-year bond yields followed a similar path to their US counterpart, except the daily movements were generally smaller.
By the end of the week, the German 10-year bund yield had added 4bps to 2.88% and the French 10-year OAT yield had gained 8bps to 3.48%. The Italian 10-year BTP yield increased by 16bps over the week to 4.93% while the British 10-year gilt yield finished 13bps higher at 4.72%.
The AOFM held just the one vanilla bond tender this week; $800 million of June 2035s were priced at a nominal yield of 4.67%. 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 $10.05 billion. There are currently $833.15 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 $29.00 billion of short-term Treasury notes outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.18 | -0.02 | 0.16 | 4.24 | 4.18 |
| 21-Nov-24 | 0.25 | 41,300 | 4.15 | -0.08 | 0.18 | 4.28 | 4.15 |
| 21-Apr-25 | 3.25 | 41,500 | 4.11 | -0.07 | 0.25 | 4.24 | 4.11 |
| 21-Nov-25 | 0.25 | 39,200 | 4.02 | -0.06 | 0.23 | 4.14 | 4.02 |
| 21-Apr-26 | 4.25 | 39,600 | 4.00 | -0.08 | 0.27 | 4.13 | 4.00 |
| 21-Sep-26 | 0.50 | 37,800 | 4.00 | -0.08 | 0.27 | 4.13 | 4.00 |
| 21-Apr-27 | 4.75 | 36,700 | 4.01 | -0.08 | 0.28 | 4.13 | 4.01 |
| 21-Nov-27 | 2.75 | 31,400 | 4.03 | -0.06 | 0.31 | 4.16 | 4.03 |
| 21-May-28 | 2.25 | 31,700 | 4.07 | -0.04 | 0.33 | 4.19 | 4.07 |
| 21-Nov-28 | 2.75 | 34,800 | 4.11 | -0.03 | 0.34 | 4.24 | 4.11 |
| 21-Apr-29 | 3.25 | 36,600 | 4.16 | -0.02 | 0.36 | 4.29 | 4.16 |
| 21-Nov-29 | 2.75 | 34,700 | 4.22 | 0.00 | 0.39 | 4.34 | 4.22 |
| 21-May-30 | 2.50 | 37,100 | 4.28 | 0.00 | 0.41 | 4.41 | 4.28 |
| 21-Dec-30 | 1.00 | 38,700 | 4.34 | 0.01 | 0.44 | 4.47 | 4.33 |
| 21-Jun-31 | 1.50 | 38,100 | 4.39 | 0.02 | 0.46 | 4.52 | 4.38 |
| 21-Nov-31 | 1.00 | 21,000 | 4.44 | 0.03 | 0.48 | 4.56 | 4.41 |
| 21-May-32 | 1.25 | 39,300 | 4.47 | 0.04 | 0.50 | 4.60 | 4.44 |
| 21-Nov-32 | 1.75 | 29,000 | 4.51 | 0.05 | 0.52 | 4.64 | 4.46 |
| 21-Apr-33 | 4.50 | 25,100 | 4.52 | 0.05 | 0.53 | 4.64 | 4.46 |
| 21-Nov-33 | 3.00 | 22,500 | 4.54 | 0.05 | 0.53 | 4.66 | 4.48 |
| 21-May-34 | 3.75 | 18,800 | 4.55 | 0.05 | 0.54 | 4.67 | 4.50 |
| 21-Dec-34 | 3.50 | 17,000 | 4.58 | 0.06 | 0.54 | 4.70 | 4.52 |
| 21-Jun-35 | 2.75 | 13,850 | 4.60 | 0.06 | 0.53 | 4.72 | 4.54 |
| 21-Apr-37 | 3.75 | 12,300 | 4.68 | 0.06 | 0.52 | 4.81 | 4.62 |
| 21-Jun-39 | 3.25 | 10,300 | 4.78 | 0.07 | 0.52 | 4.90 | 4.72 |
| 21-May-41 | 2.75 | 14,300 | 4.85 | 0.07 | 0.52 | 4.96 | 4.78 |
| 21-Mar-47 | 3.00 | 14,200 | 4.92 | 0.07 | 0.54 | 5.03 | 4.85 |
| 21-Jun-51 | 1.75 | 19,600 | 4.93 | 0.07 | 0.53 | 5.04 | 4.85 |