Summary: ACGB bond yields almost unchanged in Australia; ACGB 10-year spread to US Treasury yield rises to -4bps; 10-year bond yields down in US, major European markets; $2.8 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields had a fairly quiet week, with yields moving a few basis points either way on any given day. By the end of the week, the 3-year ACGB yield had added 1bp to 3.78% while 10-year and 20-year yields both finished unchanged at 4.21% and 4.51% respectively. The spread between US and Australian 10-year Treasury bond yields rose from -7bps to -4bps.
Over in the US, 10-year bond yields started its shortened week quietly and then moved moderately higher midweek. Yields steadied on Thursday before dropping noticeably at the end of the week.
The Conference Board’s January reading of its Leading Index posted a 0.4% fall on Tuesday, yet another negative result in a string of such results. However, the conference Board is no longer expecting a US recession this year, just near-zero growth.
S&P Global Market Intelligence’s latest flash reading of its composite index was released Thursday, with the index falling back from 52.0 in January to 51.4. The manufacturing index increased from 50.7 to 51.7 while the services index lost 1.2 to 51.3. “The early PMI data for February indicate that the US economy continued to expand midway through the first quarter, pointing to annualized GDP growth in the region of 2%,” said S&P’s Chris Williamson.
The US Fed’s Nowcast model was updated at the end of the week as usual. The March 2024 quarter forecast remained unchanged at 2.8%.
By the end of the week, the US 2-year Treasury bond yield had gained 3bps to 4.67%, the 10-year yield had lost 3bps to 4.25% while the 30-year yield finished 6bps lower at 4.37%.
In major euro-zone markets, 10-year bond yields moved in a broadly similar manner to their US counterpart.
February’s consumer sentiment report was released midweek. The index indicated euro-zone sentiment had improved a little in February, although he index is still well below its long-term average.
S&P Global Market Intelligence released its February flash PMI figures for the euro-zone the next day. The preliminary reading of the composite index was 48.9, up from December’s final reading of 47.9.
By the end of the week, the German 10-year bund yield had lost 3bps to 2.37% while the French 10-year OAT yield shed 4bps to 2.83%. The Italian 10-year BTP yield decreased by 6bps to 3.81% over the week while the British 10-year gilt yield finished 8bps lower at 4.20%.
The AOFM held the usual vanilla bond tender this week and $800 million of April 2037s were priced at a nominal yield of 4.29%. 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 $29.65 billion. There are currently $852.25 billion of Treasury bonds and $40.836 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 $29.00 billion of short-term Treasury notes outstanding.