Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Friday as investors await the latest Federal Reserve (Fed) commentary and today’s economic releases, including August’s industrial production and leading index. Next week, markets will be watching for preliminary September purchasing managers’ indexes (PMIs). As of 7:00 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.95%, while the 30-year bond yield is increasing one basis point (0.01%) to 5.29%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up four basis points (0.04%) to 4.70%. 

Treasury yields were lower on Thursday as markets digested the Fed’s unanimous rate hike and projection for another rate hike this year. Both initial jobless claims and continuing claims for the prior week fell. August housing market data was mixed, with pending home sales unexpectedly rising while housing starts and the preliminary reading of building permits both declined. The yield on the 10-year note was down nine basis points (0.09%) to 4.93%, while the 30-year bond yield fell eight basis points (0.08%) to 5.28%. The yield on the two-year note decreased eight basis points (0.08%) to 4.66%. As of end of day Thursday (September 17), futures markets are pricing in 13 basis points (0.13%) worth of rate hikes at the Fed’s upcoming October meeting, with a cumulative 32 basis points (0.32%) worth of rate hikes by year-end 2026 and a cumulative 65 basis points (0.65%) worth of rate hikes by year-end 2027.

On the data front, industrial production is expected to have expanded by 0.3% month-over-month in August, compared to the prior month’s increase of 0.2%, while capacity utilization is projected to have risen to 76.4% from the prior month’s 76.3%. The Conference Board’s Leading Economic Index for August is forecasted to show an increase of 0.1%, versus the prior month’s increase of 0.2%.

In the central bank space, Fed Vice Chair for Supervision Michelle Bowman and Kansas City Fed President Jeffrey Schmid are scheduled to speak today.

Mortgage rates were higher in the latest week. For the week ending September 17, the average 30-year fixed mortgage rate was up 19 basis points (0.19%) to 6.95%, versus 6.26% a year ago. The 15-year fixed mortgage rate increased 17 basis points (0.17%) to 6.26%, versus 5.41% a year ago.

The Bloomberg 30-day visible supply fell $1.658 billion to $15.939 billion on Thursday, above the 12-month average of $15.161 billion.

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