Summary: ACGB bond yields down in Australia; ACGB 10-year spread to US Treasury yield falls to +10bps; 10-year bond yields up in US, down in some major European markets; $2.8 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields started the shortened week with a sizable fall which was followed by another more moderate fall the next day. Yields then reversed course, partially retracing over the next two days. By the end of the week, the 3-year ACGB yield had shed 10bps to 3.74%, the 10-year yield had lost 7bps to 4.24% while the 20-year yield finished 3bps lower at 4.57%. The spread between US and Australian 10-year Treasury bond yields fell back from 18bps to 10bps.
Over in the US, 10-year bond yields showed no particular trend this week.
The Conference Board’s December reading of its Leading Index posted a 0.1% decline at the start of the week. It was the twenty-first consecutive fall of the index.
S&P Global Market Intelligence’s latest flash reading of its composite index was released midweek, with the index moving from 50.9 in December to 52.3. The manufacturing index increased from 48.1 to 48.7 while the services index gained 2.4 to 50.3.
December quarter GDP figures were released on Thursday. The US economy expanded at an annualised rate of 4.9%, a faster pace than expected.
The latest report on personal consumption expenditures came out at the end of the week. Core PCE price inflation increased by 0.2% in December and by 2.9% on an annual basis, down from 3.2% in November.
The US Fed’s Nowcast model was also updated as usual. The March 2024 quarter forecast was raised from 2.4% to 2.8%.
By this point, the US 2-year Treasury bond yield had lost 4bps to 4.33%, the 10-year yield had added 1bp to 4.14% while the 30-year yield finished 4bps higher at 4.37%.
In major euro-zone markets, 10-year bond yields followed a broadly similar path their US counterpart.
January’s consumer sentiment report was released on Tuesday. The index indicated euro-zone sentiment has deteriorated after improving for a couple of months.
S&P Global Market Intelligence released its January flash PMI figures for the euro-zone midweek. The preliminary reading of the composite index was 47.9, up from December’s final reading of 47.6.
The ECB Governing Council left its official rates unchanged on Thursday.
Germany’s ifo Institute released the December reading of its business climate index at the end of the week. The index declined as firms’ views of current conditions and the short-term outlook both deteriorated.
By this point, the German 10-year bund yield had lost 4bps to 2.30%, as did the French 10-year OAT yield to 2.78%. The Italian 10-year BTP yield shed 6bps to 3.81% over the week while the British 10-year gilt yield finished 2bps higher at 4.17%.
The AOFM held the usual vanilla bond tender this week; $800 million of November 2033s were priced at a nominal yield of 4.24%. 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 $26.3 billion. There are currently $849.05 billion of Treasury bonds and $40.686 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 $27.00 billion of short-term Treasury notes outstanding.