Summary: ACGB bond yields fall in Australia; ACGB 10-year spread to US Treasury yield rises to +15bps; 10-year bond yields down in US, major European markets; $3.6 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields started the week with a couple of days of falls which were followed by a couple of days of modest rises. Yields then fell moderately at the end of the week. By this point, the 3-year ACGB yield had shed 11bps to 4.02%, the 10-year yield had lost 8bps to 4.33% while the 20-year yield finished 6bps lower at 4.66%. The spread between US and Australian 10-year Treasury bond yields rose from +13bps to +15bps.
Over in the US, 10-year bond yields crept a little higher on Monday and Tuesday before falling on each of the remaining days of the week.
There was little in the way of US data releases until Thursday when June CPI figures came out. The headline CPI declined by 0.1%, in contrast with expectations of a modest increase. The annual inflation rate slowed from 3.3% to 3.0% while the core inflation rate slowed from 3.4% to 3.3%.
June producer price indices were released the next day. The headline PPI increased by 0.2% over the month, slightly above expectations, and the annual growth rate increased from 2.4% to 2.7%.
The University of Michigan’s July reading of its consumer sentiment index came out the same say. It produced another lower figure, slightly below expectations. Short-term inflation expectations declined to 2.9%.
The New York Fed’s Nowcast model was also updated as usual. The June 2024 quarter forecast remained unchanged at 1.80% (annualised), while the September 2024 quarter forecast rose from 2.10% to 2.20%.
By this point, the US 2-year Treasury bond yield had shed 15bps to 4.45%, the 10-year yield had lost 10bps to 4.18% while the 30-year yield finished 9bps lower at 4.40%.
In major euro-zone markets, 10-year bond yields moved somewhat differently from their US counterpart but the net result was fairly similar.
By the end of the week, the German 10-year bund yield had lost 6bps to 2.47% while the French 10-year OAT yield had lost 7bps to 3.09%. The Italian 10-year BTP yield shed 15bps to 3.79% over the week while the British 10-year gilt yield finished 2bps lower at 4.21%.
The AOFM held an index-linked bond (ILB) tender as well as two vanilla tenders this week. $100 million of February 2050 ILBs were priced at a real yield of 2.19% while $700 million of May 2034s and $800 million of November 2029s were priced at nominal yields of 4.37% and 4.09% respectively. 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 2024/2025 financial year (not taking into account short-term Treasury note tenders) is $3.10 billion. There are currently $840.85 billion of Treasury bonds and $41.085 billion of Treasury index-linked bonds on issue. The next series to mature does so on 21 November 2024 when $41.30 billion worth of bonds are due. There are also $30.00 billion of short-term Treasury notes outstanding.