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 government bond, which climbed 17 basis points from 1.06% to 0.89% at month-end. The country's inflation rate registered at 2.8% in July, remaining unchanged for the third consecutive month, while the consumer confidence index also held steady at 36.7 in August.

The Australian 10-year benchmark note mid-yield increased 14 basis points to close 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 jumped 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 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, the German 10-year Bund mid-yield rose by less than one basis point to 2.28% in August. The country's annual inflation rate was revised slightly lower at 1.9% from 2.3% in July, and the HCOB Germany Manufacturing PMI was confirmed at 42.4 in the same month.

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. Meanwhile, the country's benchmark note mid-yield dropped by almost 3 basis points to 4.01%. In contrast, the annual inflation rate in the UK edged up to 2.2% in July from 2% in the previous month, but still 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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