Summary: ACGB bond yields down in Australia; ACGB 10-year spread to US Treasury yield falls to +6bps; 10-year bond yields down in US, up in most major European markets; $3.6 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields fell through to the end of the week when yields rose moderately. By this point, the 3-year ACGB yield had lost 9bps to 3.54%, the 10-year yield had shed 13bps to 3.94% while the 20-year yield finished 14bps lower at 4.32%. The spread between US and Australian 10-year Treasury bond yields fell back +13bps to +6bps.
Over in the US, 10-year bond yields fell each day of the week, the exception being Thursday when yields rose noticeably.
July producer price indices were released on Tuesday. The headline PPI increased by 0.1% over the month, slightly below expectations, while the annual growth rate slowed from 2.7% to 2.3%.
July CPI figures came out the next day. The headline CPI increased by 0.2%, in line with expectations. The annual inflation rate slowed from 3.0% to 2.9% while the core inflation rate slowed from 3.3% to 3.2%.
July’s retail sales report was released on Thursday. Total sales increased by 1.0%, more than expected and in contrast with June’s 0.2% fall.
July industrial production figures were also posted that day. Production contracted by 0.6% over the month, a larger contraction than expected.
The University of Michigan’s August reading of its consumer sentiment index came out at the end of the week.. Short-term inflation expectations remained unchanged at 2.9%.
The New York Fed’s Nowcast model was also updated as usual. The September 2024 quarter forecast was lowered from 2.2% (annualised) to 1.8%.
By this point, the US 2-year Treasury bond yield had returned to its starting point at 4.05%, the 10-year had lost 6bps to 3.88% while the 30-year yield finished 8bps lower at 4.14%.
In major euro-zone markets, 10-year bond yields moved in a vaguely-similar fashion to their US counterpart.
Germany’s ZEW August survey was published on Tuesday and it indicated the ZEW Economic Sentiment index had fallen again, this time from 41.8 to 19.2. ZEW’s current conditions index also decreased, from -68.9 to -77.3. ““The economic outlook for Germany is breaking down.”
The euro-zone’s June industrial production figures were released midweek. Output fell by 0.1% over the month, in contrast with expectations, and was 3.9% lower than in June 2023.
By the end of the week, the German 10-year bund yield had gained 2bps to 2.25%, as had the French 10-year OAT yield to 2.99%. The Italian 10-year BTP yield ended up at its starting point at 3.64% while the British 10-year gilt yield finished 2bps lower at 4.03%.
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 $20.80 billion. There are currently $858.35 billion of Treasury bonds and $41.285 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 $29.00 billion of short-term Treasury notes outstanding.