Summary: ACGB yields rise; ACGB 10-year spread to US Treasury yield falls to -9bps; 10-year bond yields rise in US, major European markets; $1 billion of bonds issued by AOFM.
Locally, long-term ACGB yields fell over the first two days of the week before reversing course over the remained three days. By the end of the week, the 3-year ACGB yield had added 4bps to 3.85%, the 10-year yield had gained 7bps to 4.30% while the 20-year yield finished 9bps higher at 4.66%. The spread between US and Australian 10-year Treasury bond yields fell from +6bps to -9bps.
Over in the US, 10-year bond yields rose consistently through the entire week.
There were no particularly notable US economic data releases until midweek when November CPI figures came out. The headline CPI increased by 0.3%, in line with expectations, taking the annual inflation rate from 2.6% to 2.7%. The annual core inflation rate remained unchanged at 3.3%.
November producer price indices were released the next day. The headline PPI increased by 0.4% over the month, above expectations, while the annual growth rate accelerated from 2.6% to 3.0%. The core annual growth rate ticked up from an upwardly-revised 3.4% to 3.5%.
The New York Fed’s Nowcast model was updated as usual at the end of the week. The December 2024 quarter forecast was remained steady at 1.9% (annualised) while the March 2025 quarter forecast was lowered from 2.4% (annualised) to 2.3%.
By this point, the US 2-year Treasury bond yield had gained 14bps to 4.24%, the 10-year yield had increased by 22bps to 4.39% while the 30-year yield finished 26bps higher at 4.60%.
In major euro-zone markets, 10-year bond yields moved in a similar fashion to their US counterpart although they remained slightly steadier early in the week.
There were little in the way of notable data events until Thursday when the Governing Council of the ECB cut its various policy rates by 25bps each, as largely expected. The ECB’s growth forecasts were also trimmed. “Staff see the economy growing by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027.”
The euro-zone’s October industrial production figures came out at the end of the week. Output remained steady over the month, in line with expectations, but contracted by 1.2% when compared to October 2023.
By this stage, German and French 10-year bond yields had both gained 15bps to 2.26% and 3.03% respectively. The Italian 10-year BTP yield rose by 18bps to 3.38% over the week while the British 10-year gilt yield finished 16bps higher at 4.51%.
The AOFM held just one bond tender this week, with $1 billion of November 2029s priced at a nominal yield of 3.84%. 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 $47.50 billion. There are currently $842.25 billion of Treasury bonds and $42.685 billion of Treasury index-linked bonds on issue. The next series to mature does so on 21 April 2025 when $41.50 billion worth of bonds are due. There are also $28.00 billion of short-term Treasury notes outstanding.