Bond Market Commentary

June 23, 2017

Thursday’s Action

Treasuries edged higher on Thursday. Yields of U.S. government debt fell modestly amid strong demand at the 30-year TIPS bond auction. The bid-to-cover ratio, a gauge of demand, increased 58 basis points to 2.83, the highest reading since October 2011. Benchmark 10-year notes were last up 4/32 to yield 2.15%. Shorter-dated two-year paper ticked up 1/32 to yield 1.34%. At the long end of the curve, the 30-year bond was 6/32 higher to yield 2.72%.

Treasury Auction

The U.S. Treasury sold $5 billion in 30-year TIPS Thursday. The offering came to market with a yield of 0.88%. The bid-to-cover ratio rose 58 basis points to 2.83, the highest since October 2011.

Mortgage Rates

Following last week's sharp decline, the 10-year Treasury yield rose three basis points this week. The 30-year mortgage rate remained essentially flat, falling one basis point to 3.90%. According to the most recent Freddie Mac Primary Mortgage Market Survey (PMMS), mortgage rates are continuing to hold at year-to-date lows amid ongoing economic uncertainty. For the period ending June 22, the average 30-year fixed-rate mortgage fell one point to 3.90%, compared to 3.56% this time in 2016. The 15-year fixed-rate mortgage average was 3.17%, down from 3.18% last week and compared to 2.83% a year ago. Five-year hybrid adjustable-rate mortgages (ARM) came in at 3.14%, down from 3.15% in the previous period and compared to 2.74% at this time last year.

This information is obtained from sources and data considered to be reliable, but its accuracy and completeness is not guaranteed by Wells Fargo Advisors.

Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly-owned subsidiary of Wells Fargo & Company and provides investment advice to Wells Fargo Bank, N.A., Wells Fargo Advisors, and other Wells Fargo affiliates. Wells Fargo Bank, N.A. is a bank affiliate of Wells Fargo & Company.