Summary: ACGB yields up in Australia; ACGB 10-year spread to US Treasury yield falls back to 18bps; 10-year bond yields up in US, major European markets; $1.8 billion of bonds issued by AOFM.
Locally, long-term ACGB yields initially moved lower before jumping on Tuesday and rising again midweek, Yields then declined over the remainder of the week. By the end of it, the 3-year ACGB yield had added 7bps to 3.89%, the 10-year yield had gained 10bps to 4.42% while the 20-year yield finished 7bps higher at 4.77%. The spread between US and Australian 10-year Treasury bond yields decreased from 24bps to 18bps.
Over in the US, 10-year bond yields increased though most of the week, with an especially noticeable increase on Monday.
The Conference Board’s September reading of its Leading Index came out at the start of the week. The index posted another fall, with that day’s jump in Treasury yields unlikely to be connected with the figures.
S&P Global’s October flash reading of its US composite index were released on Thursday. The composite index posted a rise from 54.0 in September to 54.3. The manufacturing index increased from 47.3 to 47.8 while the services index ticked up from 55.2 to 55.3. “October saw business activity continue to grow at an
encouragingly solid pace, sustaining the economic upturn that has been recorded in the year to date into the fourth quarter.”
The New York Fed’s Nowcast model was updated at the end of the week as usual. The September 2024 quarter forecast declined from 3.0% (annualised) to 2.9% while the December 2024 forecast was reduced from 2.6% to 2.5%.
By this stage, the US 2-year Treasury bond yield had gained 15bps to 4.11%, the 10-year yield had increased by 16bps to 4.24% while the 30-year yield finished 10bps higher at 4.50%.
In major euro-zone markets, 10-year bond yields moved in a fairly similar fashion to their US counterpart, the only real difference occurring on Wednesday when euro-zone yields declined a little.
October’s euro-zone consumer sentiment report was released midweek. The index indicated sentiment had improved modestly again, and is now not that far below its long-term average.
Germany’s ifo Institute released the October reading of its business climate index at the end of the week. The index rose for the first time in five months as German firms’ views of current conditions and the short-term outlook both improved.
By this point, the German 10-year bond yield had added 10bps to 2.29% and the French 10-year OAT had gained 14bps to 3.04%. The Italian 10-year BTP yield increased by 15bps to 3.50% over the week while the British 10-year gilt yield finished 19bps higher at 4.32%.
The AOFM held three vanilla bond tenders this week. $700 million of April 2029s, $800 million of December 2035s and $300 million of June 2034s were priced at nominal yields of 3.89%, 4.47% and 4.40% 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 $35.75 billion. There are currently $872.85 billion of Treasury bonds and $41.735 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.