Summary: 10-year bond yield up slightly in Australia; ACGB 10-year spread to US Treasury yield rises to +17bps; 10-year bond yields up a touch in US, down in UK, major European markets; $2.8 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields fell away over the first three days of the week, especially on Wednesday, before rising noticeably for the final two days. By the end of the week, the 3-year ACGB yield had gained 5bps to 3.94%, the 10-year yield had added 2bps to 4.01% while the 20-year yield finished 2bps lower at 4.26%. The spread between US and Australian 10-year Treasury bond yields widened from 16bps to 17bps.
Over in the US, 10-year bond yields declined all through the week with the exception of Thursday when yields rose materially.
Industrial production numbers for June were released on Tuesday. They indicated production had decreased by 0.5%, in contrast with the expected flat outcome. This latest reading implied annual GDP growth of -2.0%.
June’s retail sales report was also released and it indicated total sales had increased by 0.2% over the month, less than expected. “Non-store” sales had the largest effect on the overall result.
The Conference Board’s June reading of its Leading Index posted a 0.7% drop a couple of days later, its fifteenth consecutive fall.
By the end of the week, the US 2-year Treasury bond yield had gained 11bps to 4.85%, the 10-year yield had added 1bp to 3.84% while the 30-year yield finished 3bps lower at 3.90%.
In major euro-zone markets, 10-year bond yields fell for the first two days of the week before reversing course over the next two days. Yields then decreased modestly on Friday.
The results of July’s consumer sentiment survey were released on Thursday. The index indicated euro-zone sentiment had improved again, this time to the point where it was no longer unusually pessimistic.
By the end of the week, the German and French 10-year bond yields had both lost 5bps to 2.46% and 2.98% respectively. The Italian 10-year BTP yield fell 11bps over the week to 4.06% while the British 10-year gilt yield finished 18bps lower at 4.34%.
The AOFM held one vanilla bond tender this week; $700 million of December 2034s were priced at a yield of 3.94%. 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 $2.35 billion. There are currently $826.05 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 $25.00 billion of short-term Treasury notes outstanding after $5 billion matured on Friday.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.20 | -0.03 | -0.15 | 4.22 | 4.12 |
| 21-Nov-24 | 0.25 | 41,300 | 4.19 | 0.04 | -0.09 | 4.19 | 4.06 |
| 21-Apr-25 | 3.25 | 41,500 | 4.10 | 0.05 | -0.09 | 4.10 | 3.95 |
| 21-Nov-25 | 0.25 | 39,200 | 4.01 | 0.04 | -0.06 | 4.01 | 3.86 |
| 21-Apr-26 | 4.25 | 39,600 | 3.97 | 0.05 | -0.04 | 3.97 | 3.82 |
| 21-Sep-26 | 0.50 | 37,800 | 3.95 | 0.04 | -0.05 | 3.95 | 3.79 |
| 21-Apr-27 | 4.75 | 36,700 | 3.92 | 0.04 | -0.05 | 3.92 | 3.76 |
| 21-Nov-27 | 2.75 | 31,400 | 3.89 | 0.03 | -0.05 | 3.89 | 3.74 |
| 21-May-28 | 2.25 | 30,900 | 3.89 | 0.02 | -0.06 | 3.89 | 3.74 |
| 21-Nov-28 | 2.75 | 34,100 | 3.89 | 0.02 | -0.06 | 3.89 | 3.74 |
| 21-Apr-29 | 3.25 | 36,600 | 3.91 | 0.02 | -0.04 | 3.91 | 3.77 |
| 21-Nov-29 | 2.75 | 34,700 | 3.93 | 0.03 | -0.04 | 3.93 | 3.79 |
| 21-May-30 | 2.50 | 37,100 | 3.95 | 0.02 | -0.03 | 3.95 | 3.80 |
| 21-Dec-30 | 1.00 | 38,700 | 3.97 | 0.02 | -0.03 | 3.97 | 3.82 |
| 21-Jun-31 | 1.50 | 38,100 | 3.98 | 0.02 | -0.03 | 3.98 | 3.83 |
| 21-Nov-31 | 1.00 | 21,000 | 3.99 | 0.02 | -0.02 | 3.99 | 3.85 |
| 21-May-32 | 1.25 | 39,300 | 4.00 | 0.01 | -0.02 | 4.00 | 3.85 |
| 21-Nov-32 | 1.75 | 29,000 | 4.01 | 0.02 | -0.02 | 4.01 | 3.86 |
| 21-Apr-33 | 4.50 | 24,400 | 4.00 | 0.01 | -0.02 | 4.00 | 3.86 |
| 21-Nov-33 | 3.00 | 21,800 | 4.01 | 0.01 | -0.04 | 4.01 | 3.87 |
| 21-May-34 | 3.75 | 18,100 | 4.02 | 0.01 | -0.04 | 4.02 | 3.87 |
| 21-Dec-34 | 3.50 | 16,300 | 4.03 | 0.01 | -0.04 | 4.03 | 3.89 |
| 21-Jun-35 | 2.75 | 11,550 | 4.06 | 0.02 | -0.04 | 4.06 | 3.91 |
| 21-Apr-37 | 3.75 | 12,300 | 4.13 | 0.01 | -0.05 | 4.13 | 4.00 |
| 21-Jun-39 | 3.25 | 10,300 | 4.21 | 0.00 | -0.05 | 4.22 | 4.10 |
| 21-May-41 | 2.75 | 13,800 | 4.27 | 0.00 | -0.05 | 4.27 | 4.16 |
| 21-Mar-47 | 3.00 | 14,200 | 4.30 | 0.00 | -0.04 | 4.30 | 4.20 |
| 21-Jun-51 | 1.75 | 19,600 | 4.29 | 0.00 | -0.03 | 4.29 | 4.19 |