Summary: ACGB yields down in Australia; ACGB 10-year spread to US Treasury yield falls to 6bps; 10-year bond yields steady in US, mixed in major European markets; $1.8 billion of bonds issued by AOFM.
Locally, long-term ACGB yields pretty much repeated the previous week’s pattern and declined though the entire week. By the end of it, the 3-year ACGB yield had lost 10bps to 3.81%, the 10-year yield had shed 12bps to 4.23% while the 20-year yield finished 11bps lower at 4.57%. The spread between US and Australian 10-year Treasury bond yields fell from 18bps to 6bps.
Over in the US, 10-year bond yields rose modestly early in the week and then fell back.
The ISM’s November reading of its manufacturing PMI was released at the start of the week. The index rose 1.9 percentage points to 48.4%, above expectations.
October’s JOLTS report was released the next day. Quits, openings and separations all increased. The quit rate increased but economists generally felt the US labour market is still loosening.
The ISM’s November reading of its non-manufacturing PMI was released midweek. The index fell back after spiking in October, from 56.0 to 52.1, well below expectations.
At the end of the week, November’s non-farm payrolls report produced a solid rise in employment, somewhat above expectations. The participation rate slipped from 62.6% to 62.5% while the jobless rate ticked up 4.1% to 4.2%.
The University of Michigan’s December reading of its consumer sentiment index was also released. The index rose from November’s final figure of 71.8 to 74.0, above expectations, although it remains at a subdued level from a historical perspective. Short-term inflation expectations increased from 2.6% to 2.9%.
The New York Fed’s Nowcast model was updated as usual at the end of the week. The December 2024 quarter forecast was raised from 1.8% (annualised) to 1.9% while the March 2025 quarter forecast was raised from 2.1%to 2.4%.
By this stage, the US 2-year Treasury bond yield had lost 5bps to 4.10%, the 10-year yield had returned to its starting point at 4.17% while the 30-year yield finished 2bps lower at 4.34%.
In major euro-zone markets, 10-year bond yields moved in a sporadic style with quite some variation between France and Germany.
By the end of the week, the German 10-year bond yield had added 2bps to 2.11%, the French 10-year yield had lost 2bps to 2.88%. The Italian 10-year BTP yield fell 8bps to 3.20% over the week while the British 10-year gilt yield finished 2bps higher at 4.35%.
The AOFM held three vanilla bond tenders this week. $300 million of June 2034s, $700 million of April 2029s and $800 million of April 2037s were priced at nominal yields of 4.28%, 3.96% and 4.35% 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 $46.50 billion. There are currently $841.25 billion of Treasury bonds and $42.685 billion of Treasury index-linked bonds on issue. The next series to mature does so on 21 April 2025 when $41.50 billion worth of bonds are due. There are also $32.00 billion of short-term Treasury notes outstanding.