Summary: 10-year bond yield down in Australia; ACGB 10-year spread to US Treasury yield falls to -18bps; 10-year bond yields slip in US, UK, major European markets; $2.70 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields declined at a modest rate all through the week. By the end of it, the 3-year ACGB yield had lost 13bps to 3.72%m, the 10-year yield had shed 16bps to 4.00% while the 20-year yield finished 14bps lower at 4.35%. The spread between US and Australian 10-year Treasury bond yields decreased from -7bps to -18bps.
Over in the US, 10-year bond yields fell over the first here days of the week. Yields then stabilised and increased noticeably at the end of the week.
July’s JOLTS report came out on Tuesday and it indicated the US quit rate had slipped again. Total quits, separations and openings were all lower again.
The Conference Board’s August reading of its Consumer Sentiment Index was also released. The index dropped back after increasing in the previous two months but it remained above its long-term average.
The next day, the ADP August report slightly undershot market expectations.
On Thursday, the latest report on personal consumption expenditures indicated core PCE price inflation had increased by 0.2% in July and by 4.2% on an annual basis, up from 4.1% in June.
At the end of the week, August’s non-farm payrolls report produced a rise in employment which was slightly above expectations. However, the jobless rate ticked kicked up from 3.5% to 3.8% as the participation rate increased from 62.6% to 62.8%.
The ISM’s August PMI report was also released. The index rose again but remained in contractionary territory.
By this point, the US 2-year Treasury bond yield had shed 21bps to 4.87%, the 10-year yield had lost 5bps to 4.18% while the 30-year yield finished 1bp higher at 4.30%.
In major euro-zone markets, 10-year bond yields started the week with a modest rise before see-sawing through the remainder of the week.
The latest euro-zone’s Economic Sentiment Indicator (ESI) was released midweek. The index slipped again in August, further under its long-term average. This indicator has a solid correlation with euro-zone GDP and it implied a year-to-August growth rate of -0.2%, down from 0.1% in July.
The “flash” August consumer price index (CPI) report was released on Thursday. It produced an annual inflation rate of 5.3% in the euro-zone, above expectations. Core annual CPI slowed from 5.5% to 5.3%.
By the end of the week, the German 10-year bund yield had slipped 1bp to 2.55% and the French 10-year OAT yield had lost 2bps to 3.06%. The Italian 10-year BTP yield declined by 1bp over the week to 4.22% while the British 10-year gilt yield also finished 1bp lower at 4.52%.
The AOFM held one bond tender during the week; $700 million of November 2028s were priced at a nominal yield of 3.83%. 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 $6.65 billion. There are currently $830.05 billion of Treasury bonds and $39.886 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 $29.50 billion of short-term Treasury notes outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.01 | -0.03 | -0.10 | 4.07 | 4.01 |
| 21-Nov-24 | 0.25 | 41,300 | 3.97 | -0.06 | -0.13 | 4.06 | 3.97 |
| 21-Apr-25 | 3.25 | 41,500 | 3.86 | -0.08 | -0.16 | 3.96 | 3.86 |
| 21-Nov-25 | 0.25 | 39,200 | 3.78 | -0.10 | -0.16 | 3.88 | 3.78 |
| 21-Apr-26 | 4.25 | 39,600 | 3.73 | -0.12 | -0.17 | 3.86 | 3.73 |
| 21-Sep-26 | 0.50 | 37,800 | 3.73 | -0.12 | -0.16 | 3.85 | 3.73 |
| 21-Apr-27 | 4.75 | 36,700 | 3.72 | -0.13 | -0.14 | 3.86 | 3.72 |
| 21-Nov-27 | 2.75 | 31,400 | 3.73 | -0.14 | -0.13 | 3.87 | 3.73 |
| 21-May-28 | 2.25 | 30,900 | 3.74 | -0.14 | -0.11 | 3.88 | 3.74 |
| 21-Nov-28 | 2.75 | 34,800 | 3.77 | -0.14 | -0.10 | 3.91 | 3.77 |
| 21-Apr-29 | 3.25 | 36,600 | 3.80 | -0.13 | -0.10 | 3.94 | 3.80 |
| 21-Nov-29 | 2.75 | 34,700 | 3.83 | -0.14 | -0.09 | 3.97 | 3.83 |
| 21-May-30 | 2.50 | 37,100 | 3.87 | -0.14 | -0.08 | 4.01 | 3.87 |
| 21-Dec-30 | 1.00 | 38,700 | 3.91 | -0.15 | -0.08 | 4.05 | 3.91 |
| 21-Jun-31 | 1.50 | 38,100 | 3.93 | -0.15 | -0.07 | 4.08 | 3.93 |
| 21-Nov-31 | 1.00 | 21,000 | 3.95 | -0.15 | -0.07 | 4.10 | 3.95 |
| 21-May-32 | 1.25 | 39,300 | 3.97 | -0.15 | -0.07 | 4.13 | 3.97 |
| 21-Nov-32 | 1.75 | 29,000 | 3.99 | -0.15 | -0.07 | 4.14 | 3.99 |
| 21-Apr-33 | 4.50 | 25,100 | 3.99 | -0.15 | -0.07 | 4.14 | 3.99 |
| 21-Nov-33 | 3.00 | 22,500 | 4.00 | -0.16 | -0.06 | 4.16 | 4.00 |
| 21-May-34 | 3.75 | 18,800 | 4.02 | -0.16 | -0.06 | 4.17 | 4.02 |
| 21-Dec-34 | 3.50 | 16,300 | 4.04 | -0.16 | -0.06 | 4.20 | 4.04 |
| 21-Jun-35 | 2.75 | 12,250 | 4.07 | -0.16 | -0.06 | 4.22 | 4.07 |
| 21-Apr-37 | 3.75 | 12,300 | 4.16 | -0.16 | -0.04 | 4.32 | 4.16 |
| 21-Jun-39 | 3.25 | 10,300 | 4.26 | -0.15 | -0.03 | 4.41 | 4.26 |
| 21-May-41 | 2.75 | 14,300 | 4.33 | -0.14 | -0.03 | 4.47 | 4.33 |
| 21-Mar-47 | 3.00 | 14,200 | 4.38 | -0.14 | -0.02 | 4.52 | 4.38 |
| 21-Jun-51 | 1.75 | 19,600 | 4.39 | -0.14 | -0.01 | 4.53 | 4.39 |