Summary: 10-year bond yield up in Australia; ACGB 10-year spread to US Treasury yield rises to +19bps; 10-year bond yields up in US, UK, major European markets; $2.7 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields fell at the start of the week before bouncing back the next day. The final two days of the week produced abnormally-large increases following sizeable rises in the US. By the end of the week, 3-year and 10-year ACGB yields had both gained 24bps to 4.23% and 4.26% respectively while the 20-year yield finished 15bps higher at 4.45%. The spread between US and Australian 10-year Treasury bond yields widened from 18bps to 19bps.
Over in the US, 10-year bond yields increased each day of the shortened week, with large increases on Wednesday and Thursday.
The ISM’s June PMI report was released at the very start of the week. The index fell again, falling further into contractionary territory.
May’s JOLTS report came out on Thursday and it indicated the US quit rate had rebounded. Total quits and separations were up while openings were down.
The ISM’s June Services PMI came out at about the same time. The index rose from 50.3 to 53.9, above expectations.
The Atlanta Fed’s Nowcast model was also updated. Its June quarter GDP growth estimate was lowered from the previous week’s figure to 2.1% annualised, or a 0.5% expansion over the quarter.
At the end of the week, June’s non-farm payrolls report produced a rise in employment which was slightly greater than expected. The jobless rate ticked down to 3.6% while the participation rate remained unchanged at 62.6%.
By this point, the US 2-year Treasury bond yield had added 6bps to 4.95%, the 10-year yield had added 23bps to 4.07% while the 30-year yield finished 18bps higher at 4.04%.
In major euro-zone markets, 10-year bond yields followed a broadly-similar pattern to their US counterparts.
By the end of the week, the German 10-year bond yield had gained 24bps to 2.63% and the French 10-year OAT yield had added 26bps to 3.18%. The Italian 10-year BTP yield rose 28bps over the week to 4.35% while the British 10-year gilt yield finished 25bps higher at 4.69%.
The AOFM held one bond tender this week; $700 million of November 2033s were priced at a yield of 3.99%. 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 $0.70 billion. There are currently $824.55 billion of Treasury bonds and $39.436 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 $26.00 billion of short-term Treasury notes outstanding after $2.5 billion matured on Friday.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.45 | 0.09 | 0.55 | 4.45 | 4.29 |
| 21-Nov-24 | 0.25 | 41,300 | 4.46 | 0.17 | 0.69 | 4.46 | 4.23 |
| 21-Apr-25 | 3.25 | 41,500 | 4.40 | 0.19 | 0.76 | 4.40 | 4.15 |
| 21-Nov-25 | 0.25 | 39,200 | 4.31 | 0.21 | 0.82 | 4.31 | 4.04 |
| 21-Apr-26 | 4.25 | 39,600 | 4.25 | 0.21 | 0.82 | 4.25 | 3.98 |
| 21-Sep-26 | 0.50 | 37,800 | 4.23 | 0.21 | 0.81 | 4.23 | 3.95 |
| 21-Apr-27 | 4.75 | 36,700 | 4.21 | 0.22 | 0.79 | 4.21 | 3.92 |
| 21-Nov-27 | 2.75 | 31,400 | 4.19 | 0.23 | 0.77 | 4.19 | 3.90 |
| 21-May-28 | 2.25 | 30,200 | 4.19 | 0.23 | 0.76 | 4.19 | 3.89 |
| 21-Nov-28 | 2.75 | 34,100 | 4.18 | 0.23 | 0.75 | 4.18 | 3.89 |
| 21-Apr-29 | 3.25 | 36,600 | 4.20 | 0.24 | 0.73 | 4.20 | 3.90 |
| 21-Nov-29 | 2.75 | 34,700 | 4.21 | 0.24 | 0.71 | 4.21 | 3.91 |
| 21-May-30 | 2.50 | 37,100 | 4.22 | 0.24 | 0.69 | 4.22 | 3.92 |
| 21-Dec-30 | 1.00 | 38,700 | 4.23 | 0.23 | 0.66 | 4.23 | 3.93 |
| 21-Jun-31 | 1.50 | 38,100 | 4.24 | 0.23 | 0.64 | 4.24 | 3.94 |
| 21-Nov-31 | 1.00 | 21,000 | 4.25 | 0.23 | 0.63 | 4.25 | 3.95 |
| 21-May-32 | 1.25 | 39,300 | 4.25 | 0.23 | 0.62 | 4.25 | 3.96 |
| 21-Nov-32 | 1.75 | 29,000 | 4.25 | 0.23 | 0.61 | 4.25 | 3.96 |
| 21-Apr-33 | 4.50 | 24,400 | 4.25 | 0.23 | 0.61 | 4.25 | 3.96 |
| 21-Nov-33 | 3.00 | 21,800 | 4.26 | 0.23 | 0.59 | 4.26 | 3.97 |
| 21-May-34 | 3.75 | 18,100 | 4.27 | 0.22 | 0.58 | 4.27 | 3.98 |
| 21-Dec-34 | 3.50 | 15,500 | 4.28 | 0.22 | 0.57 | 4.28 | 4.00 |
| 21-Jun-35 | 2.75 | 11,550 | 4.30 | 0.22 | 0.55 | 4.30 | 4.02 |
| 21-Apr-37 | 3.75 | 12,300 | 4.37 | 0.21 | 0.50 | 4.37 | 4.09 |
| 21-Jun-39 | 3.25 | 10,300 | 4.43 | 0.19 | 0.46 | 4.43 | 4.17 |
| 21-May-41 | 2.75 | 13,800 | 4.46 | 0.15 | 0.42 | 4.46 | 4.23 |
| 21-Mar-47 | 3.00 | 14,200 | 4.48 | 0.14 | 0.37 | 4.48 | 4.26 |
| 21-Jun-51 | 1.75 | 19,600 | 4.48 | 0.14 | 0.36 | 4.48 | 4.26 |