Bond Market Commentary

April 23, 2018

Friday’s Action

Treasury yields continued their ascent on Friday amid a strong week of economic data and hawkish sentiment from Federal Reserve members. There were no economic updates on Friday but strong employment data earlier in the week remained a catalyst for rising rates. The yield on the benchmark 10-year note climbed four basis points and finished at 2.96%, the highest level since January 2014. On the short end of the curve the yield on the two-year note added two basis points to finish at 2.46%. In central bank news, Chicago Federal Reserve President Charles Evans stated he believes a path of gradual interest rate hikes is appropriate in the current economic environment. On the long end of the curve the 30-year bond finished up four basis points to 3.14%.

Mortgage Rates

Mortgage rates climbed this week as treasury yields spiked to multi-year highs, according to Freddie Mac Primary Market Mortgage Survey® (PMMS®). For the period ending April 19, 2018, the 30-year fixed rate mortgage added five basis points to 4.47%. This compares to 3.97% a year ago. The 15-year fixed rate mortgage climbed seven basis points for the week to 3.94%, and compares to 3.23% this time last year. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.67%, up six basis points from a week ago and compares to 3.17% last year.

Municipal Market Commentary

Last week, the municipal market indices showed that muni bonds were weaker. Tax-exempt new issue supply is expected to total approximately $7.6 billion the week of April 23, up from $5.1 billion the prior week and above the 2018 weekly average of $4.6 billion. The Bloomberg 30-day visible supply fell $222 million to $9.721 billion on Friday, below the 12-month average of $11.171 billion.

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 Bank, N.A., a bank affiliate of Wells Fargo & Company.