Summary: ACGB yields up in Australia; ACGB 10-year spread to US Treasury yield slips back to 16bps; 10-year bond yields up in US, major European markets; $1.5 billion of bonds issued by AOFM.
Locally, long-term ACGB yields moved higher at a moderate pace each day, the exception being Tuesday. By the end of the week, the 3-year ACGB yield had gained 15bps to 4.04%, the 10-year yield had added 13bps to 4.55% while the 20-year yield finished 12bps higher at 4.89%. The spread between US and Australian 10-year Treasury bond yields decreased from 18bps to 16bps.
Over in the US, 10-year bond yields trended up through the week, ending it an especially noticeable increase.
The Conference Board’s October reading of its Consumer Confidence Index was released on Tuesday. The index reversed September’s fall and rose back to an above-average reading.
September’s JOLTS report was released the same day. Quits and openings decreased while separations increased. The quit rate declined again but only after the previous month’s rate was revised up.
September quarter GDP figures were released the next day. The US economy expanded at an annualised rate of 2.8%, essentially in line with expectations, and the annual growth rate slowed from 3.0% in the previous quarter to 2.7%.
The latest report on personal consumption expenditures came out on Thursday. Core PCE price inflation increased by 0.3% in September and by 2.7% on an annual basis, unchanged.
At the end of the week, October’s non-farm payrolls report produced a modest rise in employment well below expectations. The participation rate slipped from 62.7% to 62.6% while the jobless rate remained unchanged at 4.1%.
The ISM’s October reading of its manufacturing PMI was also released. The index remained fell further below 50, registering 46.5.
The New York Fed’s Nowcast model was also updated at the end of the week as usual. The December 2024 quarter forecast was lowered from 2.5% (annualised) to 2.0%.
By this stage, the US 2-year Treasury bond yield had added 11bps to 4.22%, the 10-year yield had gained 15bps to 4.39% while the 30-year yield finished 8bps higher at 4.58%.
In major euro-zone markets, 10-year bond yields generally increased modestly throughout the entire week.
September quarter GDP figures were released on midweek. The euro-zone economy expanded by 0.4%, more than the expected 0.2% rise. The annual growth rate accelerated from 0.6% to 0.9%.
The latest reading of the euro-zone’s Economic Sentiment Indicator (ESI) was posted the same morning. The index slipped a little again in October and remains considerably under its long-term average. This indicator has a solid correlation with euro-zone GDP and it implied a year-to-October growth rate of 0.4%.
The “flash” October consumer price index (CPI) report was released on Thursday. The euro-zone CPI increased by 0.3% over the month and by 2.0% over the year, up from 1.7% in August. Annual core CPI remained unchanged at 2.7%.
By the end of the week, the German 10-year bond yield had gained 12bps to 2.41% while the French 10-year OAT had added 11bps to 3.15%. The Italian 10-year BTP yield increased by 18bps to 3.68% over the week while the British 10-year gilt yield again finished 19bps higher, this time at 4.51%.
The AOFM held two vanilla bond tenders this week. $700 million of November 2028s and $800 million of December 2034s were priced at nominal yields of 3.96% and 4.55% 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 $37.25 billion. There are currently $874.35 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 $31.00 billion of short-term Treasury notes outstanding.