Summary: 10-year bond yield up in Australia; ACGB 10-year spread to US Treasury yield rises to +15bps; 10-year bond yields up in US, major European markets; $2.7 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields fell away over the first two days of the week before rising noticeably through the remaining days of the week. By the end of it, the 3-year ACGB yield had slipped 1bp to 3.87%, the 10-year yield had gained 12bps to 4.197% while the 20-year yield finished 14bps higher at 4.50%. The spread between US and Australian 10-year Treasury bond yields widened from 12bps to 15bps.
Over in the US, 10-year bond yields rose through the week until Friday when a substantial reversal took place.
The ISM’s July PMI report was released on Tuesday. The index rose but remained under 50, still in contractionary territory.
June’s JOLTS report also came out and it indicated the US quit rate had slipped. Total quits, separations and openings were all lower than in May.
The Atlanta Fed’s Nowcast model was also updated. Its September quarter GDP growth estimate was initiated at 3.9% annualised, or a 1.0% expansion over the quarter.
The next day, the ADP July report overshot market expectations for a second consecutive month.
The ISM’s July Services PMI was released on Thursday. The index fell from 53.9 to 52.7, slightly below expectations.
At the end of the week, July’s non-farm payrolls report produced a rise in employment which was in line with expectations. The jobless rate ticked down to 3.5% while the participation rate remained unchanged at 62.6%.
By this point, the US 2-year Treasury bond yield had shed 9bps to 4.78%, the 10-year yield had gained 9bps to 4.04% while the 30-year yield finished 19bps higher at 4.20%.
In major euro-zone markets, 10-year bond yields moved higher through the week after a quiet start on Monday. Modest pullbacks took place midweek and Friday.
The “flash” July consumer price index (CPI) report was released at the start of the week. It produced an annual inflation rate of 5.3% in the euro-zone, in line with expectations. Core annual CPI slowed from 5.5% to 5.3%.
July euro-zone employment figures were released the next day. The unemployment rate remained unchanged at 6.4%.
The Bank of England’s August policy meeting took place on Thursday and raised its Bank Rate by 25bps to 5.25%,
By the end of the week, German and French 10-year yields had both gained 7bps to 2.56% and 3.09% respectively. The Italian 10-year BTP yield increased by 11bps over the week to 4.21% while the British 10-year gilt yield finished 8bps higher at 4.47%.
The AOFM held one vanilla bond tender this week; $700 million of May 2034s were priced at a yield of 4.01%. 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 $3.75 billion. There are currently $827.45 billion of Treasury bonds and $39.586 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 | 4.09 | -0.02 | -0.27 | 4.12 | 4.05 |
| 21-Nov-24 | 0.25 | 41,300 | 4.09 | -0.01 | -0.21 | 4.12 | 3.99 |
| 21-Apr-25 | 3.25 | 41,500 | 3.99 | -0.03 | -0.23 | 4.02 | 3.89 |
| 21-Nov-25 | 0.25 | 39,200 | 3.92 | -0.02 | -0.18 | 3.93 | 3.81 |
| 21-Apr-26 | 4.25 | 39,600 | 3.89 | -0.02 | -0.16 | 3.89 | 3.77 |
| 21-Sep-26 | 0.50 | 37,800 | 3.87 | -0.01 | -0.15 | 3.87 | 3.74 |
| 21-Apr-27 | 4.75 | 36,700 | 3.87 | 0.00 | -0.12 | 3.87 | 3.73 |
| 21-Nov-27 | 2.75 | 31,400 | 3.87 | 0.02 | -0.09 | 3.87 | 3.72 |
| 21-May-28 | 2.25 | 30,900 | 3.89 | 0.04 | -0.06 | 3.89 | 3.72 |
| 21-Nov-28 | 2.75 | 34,100 | 3.92 | 0.05 | -0.03 | 3.92 | 3.74 |
| 21-Apr-29 | 3.25 | 36,600 | 3.96 | 0.06 | -0.01 | 3.96 | 3.78 |
| 21-Nov-29 | 2.75 | 34,700 | 4.00 | 0.07 | 0.02 | 4.00 | 3.81 |
| 21-May-30 | 2.50 | 37,100 | 4.04 | 0.09 | 0.05 | 4.04 | 3.85 |
| 21-Dec-30 | 1.00 | 38,700 | 4.08 | 0.10 | 0.08 | 4.08 | 3.88 |
| 21-Jun-31 | 1.50 | 38,100 | 4.11 | 0.11 | 0.11 | 4.11 | 3.91 |
| 21-Nov-31 | 1.00 | 21,000 | 4.14 | 0.11 | 0.12 | 4.14 | 3.93 |
| 21-May-32 | 1.25 | 39,300 | 4.16 | 0.12 | 0.14 | 4.16 | 3.95 |
| 21-Nov-32 | 1.75 | 29,000 | 4.18 | 0.12 | 0.16 | 4.18 | 3.96 |
| 21-Apr-33 | 4.50 | 25,100 | 4.18 | 0.12 | 0.16 | 4.18 | 3.96 |
| 21-Nov-33 | 3.00 | 21,800 | 4.19 | 0.13 | 0.16 | 4.19 | 3.97 |
| 21-May-34 | 3.75 | 18,800 | 4.21 | 0.13 | 0.16 | 4.21 | 3.98 |
| 21-Dec-34 | 3.50 | 16,300 | 4.23 | 0.13 | 0.17 | 4.23 | 4.00 |
| 21-Jun-35 | 2.75 | 11,550 | 4.26 | 0.13 | 0.18 | 4.26 | 4.03 |
| 21-Apr-37 | 3.75 | 12,300 | 4.34 | 0.15 | 0.19 | 4.34 | 4.11 |
| 21-Jun-39 | 3.25 | 10,300 | 4.43 | 0.14 | 0.19 | 4.43 | 4.20 |
| 21-May-41 | 2.75 | 13,800 | 4.49 | 0.14 | 0.19 | 4.49 | 4.26 |
| 21-Mar-47 | 3.00 | 14,200 | 4.56 | 0.15 | 0.21 | 4.56 | 4.31 |
| 21-Jun-51 | 1.75 | 19,600 | 4.56 | 0.16 | 0.22 | 4.56 | 4.31 |