Summary: ACGB bond yields up in Australia; ACGB 10-year spread to US Treasury yield falls to 12bps; 10-year bond yields up in US, major European markets; $3.65 billion of bonds, notes issued by AOFM.
Locally, long-term ACGB yields moved higher throughout the entire week with the exception of a moderate cline on Wednesday. By the end of the week, the 3-year ACGB yield had added 11bps to 3.56,%, the 10-year yield had gained 10bps to 4.08% while the 20-year yield finished 8bps higher at 4.49%. The spread between US and Australian 10-year Treasury bond yields decreased from 23bps to 12bps.
Over in the US, 10-year bond yields rose each day with the exception of Tuesday.
The ISM’s August reading of its manufacturing PMI was the first major piece of economic data for the US week and it came out on Tuesday. The index remained unchanged and remains below 50.
August’s JOLTS report was released the same day. Quits and separations decreased while openings increased. The quit rate declined again.
The ISM’s September reading of its non-manufacturing PMI was released on Thursday. The index increased noticeably, from 51.5 to 54.9, well above expectations.
At the end of the week, September’s non-farm payrolls report produced a rise in employment well above expectations. The participation rate remained unchanged while jobless rate ticked down to 4.1%.
The New York Fed’s Nowcast model was also updated as usual. The September 2024 quarter forecast increased from 3.0% (annualised) to 3.1% while the December 2024 forecast remained steady at 2.8%.
By this point, the US 2-year Treasury bond yield had gained 36bps to 3.92%, the 10-year yield had added 21bps to 3.96% while the 30-year yield finished 14bps higher at 4.24%.
In major euro-zone markets, 10-year bond yields moved in a somewhat similar fashion to their US counterpart.
The “flash” September consumer price index (CPI) report was released on Tuesday. The euro-zone CPI declined by 0.1% over the month and by 1.8% over the year, down from 2.2% in August. Annual core CPI slowed from 2.8% to 2.7%.
By the end of the week, the German 10-year bond yield had gained 8bps to 2.21% and the French 10-year OAT had added 6bps to 2.99%. The Italian 10-year BTP yield increased by 5bps to 3.51% over the week while the British 10-year gilt yield finished 16bps higher at 4.22%.
The AOFM held two index-linked bond (ILB) tenders as well as two vanilla bond tenders this week. $100 million of August 2035 ILBs and $50 million of February 2050 ILBs were priced at real yields of 1.68% and 2.02% respectively. $800 million of June 2035s and $700 million of November 2027s were priced at nominal yields of 3.98% and 3.58% 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 $30.85 billion. There are currently $868.05 billion of Treasury bonds and $41.635 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 $27.00 billion of short-term Treasury notes outstanding.