Summary: ACGB bond yields increase substantially in Australia; ACGB 10-year spread to US Treasury yield rises to -12bps; 10-year bond yields up in US, major European markets; $0.8 billion of bonds by AOFM, $35.9 billion matures.
Locally, long-term ACGB yields started with little net change after two days. However jumped on each of the remaining two days of the shortened week. By the end of its point, the 3-year ACGB yield had gained 32bps to 4.13%, the 10-year yield had added 27bps to 4.54% while the 20-year yield finished 24bps higher at 4.80%. The spread between US and Australian 10-year Treasury bond yields rose from -35bps to -12bps.
Over in the US, 10-year bond yields declined a little in the early days of the week, then rose moderately for a couple of days before partly falling back on Friday.
Notable data releases were largely absent until Thursday when March quarter GDP figures were released. The US economy expanded at an annualised rate of 1.6%, a slower pace than expected. However, the behaviour of the price deflator in the quarter drew some attention.
The latest report on personal consumption expenditures was released at the end of the week. Core PCE price inflation increased by 0.3% in March and by 2.8% on an annual basis, unchanged from February.
The US Fed’s Nowcast model was also updated as usual. The March 2024 quarter forecast remained unchanged at 2.3% (annualised), as did the June quarter forecast at 2.7%.
By this point, the US 2-year Treasury bond yield had returned to its starting point at 4.99%, the 10-year yield had gained 4bps to 4.66% while the 30-year yield finished 6bps higher at 4.77%.
In major euro-zone markets, 10-year bond yields followed broadly similar patterns to their US counterpart except the midweek gain was larger.
April’s consumer sentiment report was released at the start of the week. The index indicated euro-zone sentiment had improved again, albeit slightly, and the index is still substantially below its long-term average.
Germany’s ifo Institute released the April reading of its business climate index midweek. The index increased for a third consecutive month as firms’ views of current conditions and the short-term outlook both improved.
By the end of the week, the German 10-year bund yield had gained 7bps to 2.57% while the French 10-year OAT yield had added 5bps to 3.06%. The Italian 10-year BTP yield returned to its starting point at 3.89% over the week while the British 10-year gilt yield finished 10bps higher at 4.43%.
The AOFM held one bond tender this week; $800 million of November 2033s were issued at a yield of 3.90%. There were no Treasury note tenders.
The gross value of all bonds issued by the AOFM in the 2023/2024 financial year (not taking into account short-term Treasury note tenders) is $35.95 billion. There are currently $823.05 billion of Treasury bonds and $40.435 billion of Treasury index-linked bonds on issue after $35.90 billion matured at the end of the week. The next series to mature does so on 21 November 2024 when $41.30 billion worth of bonds are due. There are also $28.00 billion of short-term Treasury notes outstanding.