Tradeweb Government Bond Update – August 2024
It was a mixed month for global government debt markets, with yields both increasing and decreasing across the board. The biggest mover in August was the mid-yield on Japan’s 10-year government bond, which declined 17 basis points over the month to close at 0.89%. The country’s inflation rate registered at 2.8% in July, remaining unchanged for the third consecutive month, while the consumer confidence index held steady at 36.7 in August.
The Australian 10-year benchmark note mid-yield dropped 14 basis points to finish August at 3.94%. The Westpac Melbourne Institute Consumer Sentiment Index rose by 2.8% to 85 from 82.7 in July. Meanwhile, the country’s inflation rate came in at 3.8% year-over-year in the second quarter of 2024, up slightly from the previous quarter’s 3.6%.
Between August 22 and 24, central bankers, economists and policymakers gathered for the annual Jackson Hole Economic Symposium in Wyoming, where U.S. Federal Reserve Chair Jerome Powell said that the “time has come” for the central bank to cut interest rates. The yield on the U.S. 10-year Treasury fell by almost 13 basis points to 3.98%, whereas the annual inflation rate slowed to 2.9% in July from 3% in the previous month.
In neighbouring Canada, the country’s 10-year benchmark note yield closed August at 3.15%, one basis point lower than the prior month’s 3.16%. Similarly, the annual inflation rate fell to 2.5% in July from 2.7% in June, remaining within the Bank of Canada’s 1% to 3% target range.
Europe’s largest mover was the Italian 10-year government bond, whose yield registered at 3.67%, almost 6 basis points higher than July’s figure of 3.61%. The inflation rate in Italy eased to 1.1% in August, down from a 1.3% increase in the prior month. At the same time, the country’s manufacturing confidence index and consumer confidence index declined to 87.1 and 96.1, respectively.
Elsewhere in the Eurozone, Germany’s 10-year Bund mid-yield dropped by less than one basis point to 2.28% in August. The country’s annual inflation rate fell to 1.9% in August from 2.3% in July, according to preliminary estimates by the Federal Statistical Office. The HCOB Germany Manufacturing PMI was revised higher to 42.4 in August from an earlier estimate of 42.1, but still below July's 43.2 figure.
Over in the UK, the Bank of England voted to cut interest rates to 5% from 5.25% on August 1, the first drop in rates since March 2020. The country’s 10-year benchmark note mid-yield rose by almost 3 basis points to 4.01%. The annual inflation rate edged up to 2.2% in July from 2% in the previous month, slightly below market expectations of 2.3%. The GfK Consumer Confidence indicator remained the same at -13 in August, while the S&P Global UK Manufacturing PMI climbed to 52.5.
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