Summary: 10-year bond yield up in Australia; ACGB 10-year spread to US Treasury yield rises to -8bps; 10-year bond yields up in US, major European markets; $2.95 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields started the week with a moderate fall which was followed by a noticeable jump on Tuesday. Yields slipped again midweek before rising sharply the next day and then rising moderately on Friday. By this point, the 3-year ACGB yields had added 6bps to 4.09%, the 10-year yield had gained 15bps to 4.50% while the 20-year yield finished 16bps higher at 4.82%. The spread between US and Australian 10-year Treasury bond yields increased from -9bps to -8bps.
Over in the US, 10-year bond yields increased each day until Thursday when they fell back modestly before stabilising on Friday.
The Conference Board’s September reading of its Consumer Sentiment Index was released on Tuesday. The index fell again but it still remained above its long-term average.
At the end of the week, the latest report on personal consumption expenditures indicated core PCE price inflation had increased by just 0.1% in August and by 3.9% on an annual basis, down from 4.3% in July.
The US Fed’s Nowcast model was also updated. The September quarter GDP growth forecast was unchanged at 2.1% annualised, or a 0.5% expansion over the quarter. Its estimate of December quarter’s GDP growth also remained unchanged at 2.0% annualised.
By this point, the US 2-year Treasury bond yield had lost 4bps to 5.05%, the 10-year yield had gained 14bps to 4.58% while the 30-year yield finished 17bps higher at 4.70%.
In major euro-zone markets, 10-year bond yields followed a broadly similar path to their US counterpart, rising each day with the exception of Friday when yields fell substantially.
Germany’s ifo Institute released the September reading of its business climate index at the start of the week. The index fell for a fifth consecutive month, as firms’ views of current conditions deteriorated while their collective outlook improved.
The latest euro-zone’s Economic Sentiment Indicator (ESI) was on Thursday. The index slipped again in September, further under its long-term average. This indicator has a solid correlation with euro-zone GDP and it implied a year-to-September growth rate of -0.2%, unchanged from August.
The “flash” September consumer price index (CPI) report was the next day. It produced an annual inflation rate of 4.5% in the euro-zone, below expectations. Annual core CPI slowed from 5.3% to 4.5%.
By this point, the German 10-year bund yield had gained 10bps to 2.84% and the French 10-year OAT yield had added 12bps to 3.40%. The Italian 10-year BTP yield increased by 20bps over the week to 4.77% while the British 10-year gilt yield also finished 20bps higher at 4.59%.
The AOFM held an index-linked bond (ILB) tender as well as the now-usual vanilla bond tender this week; $150 million of November 2032s were priced at a real yield of 1.89% and $800 million of May 2028s were priced at a nominal yield of 4.11%. 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 $9.25 billion. There are currently $832.35 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 $27.00 billion of short-term Treasury notes outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.20 | 0.06 | 0.15 | 4.20 | 4.12 |
| 21-Nov-24 | 0.25 | 41,300 | 4.23 | 0.05 | 0.20 | 4.23 | 4.17 |
| 21-Apr-25 | 3.25 | 41,500 | 4.18 | 0.06 | 0.24 | 4.19 | 4.09 |
| 21-Nov-25 | 0.25 | 39,200 | 4.08 | 0.03 | 0.20 | 4.10 | 4.02 |
| 21-Apr-26 | 4.25 | 39,600 | 4.08 | 0.05 | 0.22 | 4.10 | 4.00 |
| 21-Sep-26 | 0.50 | 37,800 | 4.08 | 0.05 | 0.23 | 4.10 | 4.00 |
| 21-Apr-27 | 4.75 | 36,700 | 4.08 | 0.05 | 0.23 | 4.11 | 4.00 |
| 21-Nov-27 | 2.75 | 31,400 | 4.10 | 0.06 | 0.23 | 4.12 | 4.01 |
| 21-May-28 | 2.25 | 31,700 | 4.11 | 0.06 | 0.23 | 4.13 | 4.02 |
| 21-Nov-28 | 2.75 | 34,800 | 4.14 | 0.07 | 0.24 | 4.15 | 4.04 |
| 21-Apr-29 | 3.25 | 36,600 | 4.18 | 0.08 | 0.25 | 4.19 | 4.07 |
| 21-Nov-29 | 2.75 | 34,700 | 4.22 | 0.09 | 0.25 | 4.23 | 4.10 |
| 21-May-30 | 2.50 | 37,100 | 4.28 | 0.11 | 0.28 | 4.28 | 4.15 |
| 21-Dec-30 | 1.00 | 38,700 | 4.33 | 0.11 | 0.28 | 4.33 | 4.20 |
| 21-Jun-31 | 1.50 | 38,100 | 4.38 | 0.12 | 0.29 | 4.38 | 4.23 |
| 21-Nov-31 | 1.00 | 21,000 | 4.41 | 0.13 | 0.31 | 4.41 | 4.25 |
| 21-May-32 | 1.25 | 39,300 | 4.44 | 0.14 | 0.31 | 4.44 | 4.27 |
| 21-Nov-32 | 1.75 | 29,000 | 4.46 | 0.14 | 0.32 | 4.46 | 4.29 |
| 21-Apr-33 | 4.50 | 25,100 | 4.46 | 0.14 | 0.32 | 4.46 | 4.29 |
| 21-Nov-33 | 3.00 | 22,500 | 4.48 | 0.15 | 0.33 | 4.48 | 4.31 |
| 21-May-34 | 3.75 | 18,800 | 4.50 | 0.15 | 0.32 | 4.50 | 4.33 |
| 21-Dec-34 | 3.50 | 17,000 | 4.52 | 0.15 | 0.32 | 4.52 | 4.35 |
| 21-Jun-35 | 2.75 | 13,050 | 4.54 | 0.14 | 0.32 | 4.54 | 4.37 |
| 21-Apr-37 | 3.75 | 12,300 | 4.62 | 0.15 | 0.31 | 4.62 | 4.45 |
| 21-Jun-39 | 3.25 | 10,300 | 4.72 | 0.15 | 0.31 | 4.72 | 4.54 |
| 21-May-41 | 2.75 | 14,300 | 4.78 | 0.15 | 0.31 | 4.78 | 4.60 |
| 21-Mar-47 | 3.00 | 14,200 | 4.85 | 0.15 | 0.33 | 4.85 | 4.68 |
| 21-Jun-51 | 1.75 | 19,600 | 4.85 | 0.14 | 0.32 | 4.85 | 4.69 |