Summary: 10-year bond yield up in Australia; ACGB 10-year spread to US Treasury yield rises to -2bps; 10-year bond yields up in US, UK, flat in other major European markets; $2.5 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields increased over the first two days of the week before dropping back on Wednesday and then see-sawing for the remainder of the week. By the end of it, the 3-year ACGB yield had added 7bps to 3.89%, the 10-year yield had gained 12bps to 4.23% while the 20-year yield finished 13bps higher at 4.56%. The spread between US and Australian 10-year Treasury bond yields increased from -4bps to -2bps.
Over in the US, 10-year bond yields started the week with a moderate rise which set the tone for the following three days. Yields then fell back modestly at the end of the week.
July’s retail sales report was released on Tuesday it indicated total sales had increased by 0.7% over the month, more than expected. “Non-store” sales again had the largest effect on the overall result.
Industrial production numbers for July were released the next day. They indicated production had increased by 1.0%, more than double the expected result.
The Atlanta Fed’s Nowcast model was also updated. Its September quarter GDP growth estimate was raised to 5.8% annualised, or a 1.4% expansion over the quarter.
Minutes of the FOMC July meeting also came out.
The Conference Board’s July reading of its Leading Index posted a 0.4% fall on Thursday, its sixteenth consecutive fall.
By the end of the week, the US 2-year Treasury bond yield had added 5bps to 4.94%, the 10-year yield had gained 10bps to 4.25% while the 30-year yield finished 12bps higher at 4.38%.
In major euro-zone markets, 10-year bond yields moved modestly higher early in the week before dipping midweek. Yields rose noticeably on Thursday and fell even more noticeably at the end of the week.
Germany’s ZEW August survey was published on Tuesday. It indicated its Economic Sentiment index had increased from July’s reading of -14.7 to -12.4. ZEW’s current conditions index also deteriorated, from -59.5 to -71.3. ZEW President Achim Wambach said respondents “…anticipate a slight uptick in the economic situation by year-end…” but from a lower base.
The euro-zone’s June industrial production figures were released midweek. Output expanded by 0.5% over the month, in contrast with expectations of a contraction.
By the end of the week, the German 10-year bund yield had returned to its starting point at 2.62% and the French 10-year OAT yield had added 1bp to 3.16%. The Italian 10-year BTP yield increased by 7bps over the week to 4.32% while the British 10-year gilt yield finished 15bps higher at 4.77%.
The AOFM held just the one vanilla bond tender this week; $500 million of May 2041s were priced at a yield of 4.51%. 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 $5.10 billion. There are currently $828.65 billion of Treasury bonds and $39.736 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 $30.00 billion of short-term Treasury notes outstanding.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.06 | -0.03 | -0.16 | 4.13 | 4.06 |
| 21-Nov-24 | 0.25 | 41,300 | 4.04 | -0.01 | -0.12 | 4.11 | 4.04 |
| 21-Apr-25 | 3.25 | 41,500 | 3.97 | 0.04 | -0.08 | 4.05 | 3.97 |
| 21-Nov-25 | 0.25 | 39,200 | 3.92 | 0.05 | -0.05 | 4.00 | 3.92 |
| 21-Apr-26 | 4.25 | 39,600 | 3.90 | 0.06 | -0.02 | 3.98 | 3.90 |
| 21-Sep-26 | 0.50 | 37,800 | 3.89 | 0.07 | -0.02 | 3.97 | 3.89 |
| 21-Apr-27 | 4.75 | 36,700 | 3.89 | 0.07 | 0.01 | 3.97 | 3.89 |
| 21-Nov-27 | 2.75 | 31,400 | 3.91 | 0.09 | 0.04 | 3.99 | 3.90 |
| 21-May-28 | 2.25 | 30,900 | 3.93 | 0.09 | 0.06 | 4.01 | 3.92 |
| 21-Nov-28 | 2.75 | 34,100 | 3.96 | 0.10 | 0.09 | 4.04 | 3.94 |
| 21-Apr-29 | 3.25 | 36,600 | 4.00 | 0.10 | 0.11 | 4.09 | 3.98 |
| 21-Nov-29 | 2.75 | 34,700 | 4.04 | 0.11 | 0.13 | 4.13 | 4.01 |
| 21-May-30 | 2.50 | 37,100 | 4.08 | 0.11 | 0.15 | 4.16 | 4.05 |
| 21-Dec-30 | 1.00 | 38,700 | 4.12 | 0.11 | 0.18 | 4.21 | 4.09 |
| 21-Jun-31 | 1.50 | 38,100 | 4.15 | 0.12 | 0.19 | 4.24 | 4.12 |
| 21-Nov-31 | 1.00 | 21,000 | 4.18 | 0.12 | 0.20 | 4.27 | 4.14 |
| 21-May-32 | 1.25 | 39,300 | 4.20 | 0.12 | 0.22 | 4.29 | 4.16 |
| 21-Nov-32 | 1.75 | 29,000 | 4.22 | 0.12 | 0.23 | 4.31 | 4.18 |
| 21-Apr-33 | 4.50 | 25,100 | 4.22 | 0.12 | 0.23 | 4.30 | 4.18 |
| 21-Nov-33 | 3.00 | 21,800 | 4.23 | 0.12 | 0.24 | 4.32 | 4.19 |
| 21-May-34 | 3.75 | 18,800 | 4.25 | 0.12 | 0.24 | 4.34 | 4.21 |
| 21-Dec-34 | 3.50 | 16,300 | 4.27 | 0.13 | 0.25 | 4.36 | 4.23 |
| 21-Jun-35 | 2.75 | 12,250 | 4.30 | 0.12 | 0.25 | 4.38 | 4.26 |
| 21-Apr-37 | 3.75 | 12,300 | 4.38 | 0.13 | 0.26 | 4.47 | 4.34 |
| 21-Jun-39 | 3.25 | 10,300 | 4.48 | 0.13 | 0.26 | 4.56 | 4.43 |
| 21-May-41 | 2.75 | 14,300 | 4.54 | 0.13 | 0.27 | 4.62 | 4.48 |
| 21-Mar-47 | 3.00 | 14,200 | 4.59 | 0.13 | 0.30 | 4.67 | 4.54 |
| 21-Jun-51 | 1.75 | 19,600 | 4.60 | 0.12 | 0.30 | 4.67 | 4.54 |