Summary: ACGB bond yields down in Australia; ACGB 10-year spread to US Treasury yield rises to +27bps; 10-year bond yields down in US, major European markets; $3.5 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields fell through the entire week, with a particularly large drop midweek. By the end of the week, the 3-year ACGB yield had shed 31bps to 3.64%, the 10-year yield had lost 26bps to 4.06% while the 20-year yield finished 21bps lower at 4.46%. The spread between US and Australian 10-year Treasury bond yields increased from +12bps to +27bps.
Over in the US, 10-year bond yields fell on each day of the week, with a particularly large drop at the end of it.
June’s JOLTS report was released on Tuesday. Total quits, separations and openings all declined. The quit rate remained unchanged at 2.1% after revisions.
The Conference Board’s July reading of its Consumer Confidence Index was released about the same time. Confidence improved, with the index maintaining a reading just above its long-term average.
The ISM’s July reading of its manufacturing PMI came out on Thursday. The index slipped further below 50, from 48.5 to 46.8, below expectations and further into contractionary territory.
At the end of the week, July’s non-farm payrolls report produced a rise in employment well below expectations. The participation rate ticked up and the jobless rate rose from 4.1% to 4.3%.
The New York Fed’s Nowcast model was also updated as usual. The September 2024 quarter forecast fell back from 2.7% (annualised) to 2.10%.
By this point, the US 2-year Treasury bond yield had plunged 50bps to 3.88%, the 10-year had shed 41bps to 3.79% while the 30-year yield finished 34bps lower at 4.11%.
In major euro-zone markets, 10-year bond yields moved in a broadly-similar fashion to their US counterpart.
June quarter GDP figures were released on Tuesday. The euro-zone economy expanded by 0.3%, slightly more than expected. The annual growth rate accelerated from 0.5% to 0.6%.
The latest reading of the euro-zone’s Economic Sentiment Indicator (ESI) was posted that same morning. The index slipped a touch in July and remains noticeably under its long-term average. This indicator has a solid correlation with euro-zone GDP and it implied a year-to-July growth rate of 0.4%.
The Bank of England cut its official rate by 25bp to 5.00% on Thursday.
By the end of the week, the German 10-year bund yield had lost 22bps to 2.18 while the French 10-year OAT yield had shed 15bps to 2.96%. The Italian 10-year BTP yield lost 13bps to 3.63% over the week while the British 10-year gilt yield finished 27bps lower at 3.94%.
The AOFM held two vanilla bond tenders this week. $900 million of November 2028s and $600 million May 2034s were priced at nominal yields of 3.93% and 4.00% respectively. The usual two Treasury note tenders also 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 $17.70 billion. There are currently $855.35 billion of Treasury bonds and $41.185 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.