Summary: 10-year bond yield down in Australia; ACGB 10-year spread to US Treasury yield slips to +25bps; 10-year bond yields down in US, UK, major European markets; $2.70 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields fell, bounced and then fell again over the first three days of the week before moving very little over the remaining days. By the end of the week, the 3-year ACGB yield had returned to its starting point at 3.97%, the 10-year yield had lost 4bps to 3.99% while the 20-year yield finished 8bps lower at 4.23%. The spread between US and Australian 10-year Treasury bond yields tightened from 26bps to 25bps.
Over in the US, 10-year bond yields fell back at the start of its shortened week before hitting the pause button midweek. Yields bounced up and down over the remaining two days.
The Atlanta Fed’s Nowcast model was updated on Tuesday. Its June quarter GDP growth estimate was raised from the previous week’s figure to 1.9% annualised, or a 0.4% expansion over the quarter.
The Conference Board’s May reading of its Leading Index posted a 0.7% drop a couple of days later, its fourteenth consecutive fall.
S&P Global Market Intelligence’s latest flash reading of its composite index was released at the end of the week, with the index declining from May’s final reading of 54.3 to 53.0. The manufacturing index fell from 48.4 to 46.3 and the services index lost 0.8 to 54.1. S&P Global’s Chris Williamson said, ““Growth remains dependent on service sector spending, however, with manufacturing slipping back into decline after three months of growth.”
By this point, the US 2-year Treasury bond yield had added 3bps to 4.75%, the 10-year yield had shed 3bps to 3.74% while the 30-year yield finished 5bps lower at 3.81%.
In major euro-zone markets, 10-year bond yields started the week with a material rise before dropping significantly the next day. Yields moved higher over the next two days and then dropped precipitously at the end of the week.
The results of June’s consumer sentiment survey were released on Thursday. The index indicated euro-zone sentiment had improved again but still remained at a pessimistic level.
The Bank of England’s June policy meeting surprised markets with a 50bps rise to its Bank Rate that same day. The BoE’s policy rate stood at 5.00% after the increase.
S&P Global Market Intelligence released its June flash PMI figures for the euro-zone some hours before the US figures on Friday. The preliminary reading of the composite index was 50.3, down from May’s final reading of 52.8.
By this point, the German 10-year bond yield had shed 12bps to 2.35% while the French 10-year OAT yield had lost 9bps to 2.88%. The Italian 10-year BTP yield fell 5bps over the week to 3.98% while the British 10-year gilt yield finished 11bps lower at 4.38%.
The AOFM held just the one bond tender this week; $700 million of December 2034s were priced at a yield of 4.00%. 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 2022/2023 financial year-to-date (not taking into account buy-backs or short-term Treasury note tenders) is $80.55 billion. There are currently $823.55 billion of Treasury bonds and $39.286 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 $25.0 billion of short-term Treasury notes currently outstanding after $4.0 billion matured on Friday.
AUSTRALIAN GOVERNMENT BONDS
| MATURITY | COUPON (%) | ISSUE SIZE ($M) | CLOSING YIELD | Δ WEEK | Δ MONTH | WEEK HIGH | WEEK LOW |
|---|---|---|---|---|---|---|---|
| 21-Apr-24 | 2.75 | 35,900 | 4.37 | 0.03 | 0.65 | 4.37 | 4.27 |
| 21-Nov-24 | 0.25 | 41,300 | 4.28 | -0.01 | 0.67 | 4.28 | 4.18 |
| 21-Apr-25 | 3.25 | 41,500 | 4.19 | 0.00 | 0.70 | 4.19 | 4.11 |
| 21-Nov-25 | 0.25 | 39,200 | 4.08 | 0.01 | 0.73 | 4.08 | 3.99 |
| 21-Apr-26 | 4.25 | 39,600 | 4.02 | 0.00 | 0.70 | 4.02 | 3.94 |
| 21-Sep-26 | 0.50 | 37,800 | 3.99 | 0.00 | 0.68 | 3.99 | 3.92 |
| 21-Apr-27 | 4.75 | 36,700 | 3.96 | 0.00 | 0.65 | 3.96 | 3.89 |
| 21-Nov-27 | 2.75 | 31,400 | 3.94 | -0.01 | 0.62 | 3.94 | 3.88 |
| 21-May-28 | 2.25 | 30,200 | 3.93 | -0.01 | 0.59 | 3.93 | 3.88 |
| 21-Nov-28 | 2.75 | 34,100 | 3.93 | -0.02 | 0.57 | 3.93 | 3.88 |
| 21-Apr-29 | 3.25 | 36,600 | 3.95 | -0.01 | 0.56 | 3.95 | 3.90 |
| 21-Nov-29 | 2.75 | 34,700 | 3.95 | -0.02 | 0.52 | 3.96 | 3.92 |
| 21-May-30 | 2.50 | 37,100 | 3.96 | -0.02 | 0.49 | 3.97 | 3.93 |
| 21-Dec-30 | 1.00 | 38,700 | 3.97 | -0.03 | 0.46 | 3.99 | 3.94 |
| 21-Jun-31 | 1.50 | 38,100 | 3.98 | -0.03 | 0.44 | 4.00 | 3.95 |
| 21-Nov-31 | 1.00 | 21,000 | 3.98 | -0.04 | 0.42 | 4.01 | 3.96 |
| 21-May-32 | 1.25 | 39,300 | 3.98 | -0.04 | 0.41 | 4.02 | 3.97 |
| 21-Nov-32 | 1.75 | 29,000 | 3.99 | -0.04 | 0.40 | 4.03 | 3.97 |
| 21-Apr-33 | 4.50 | 24,400 | 3.99 | -0.04 | 0.40 | 4.03 | 3.97 |
| 21-Nov-33 | 3.00 | 21,100 | 4.00 | -0.04 | 0.38 | 4.04 | 3.99 |
| 21-May-34 | 3.75 | 18,100 | 4.01 | -0.04 | 0.38 | 4.05 | 4.00 |
| 21-Dec-34 | 3.50 | 15,500 | 4.03 | -0.05 | 0.36 | 4.07 | 4.02 |
| 21-Jun-35 | 2.75 | 11,550 | 4.05 | -0.04 | 0.34 | 4.09 | 4.04 |
| 21-Apr-37 | 3.75 | 12,300 | 4.12 | -0.06 | 0.29 | 4.17 | 4.11 |
| 21-Jun-39 | 3.25 | 10,300 | 4.20 | -0.07 | 0.26 | 4.26 | 4.19 |
| 21-May-41 | 2.75 | 13,800 | 4.24 | -0.08 | 0.21 | 4.30 | 4.23 |
| 21-Mar-47 | 3.00 | 14,200 | 4.26 | -0.09 | 0.15 | 4.32 | 4.25 |
| 21-Jun-51 | 1.75 | 19,300 | 4.23 | -0.09 | 0.12 | 4.30 | 4.22 |