Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Thursday as investors look ahead to several key economic releases, including the advance reading of third-quarter gross domestic product (GDP), September’s personal income and spending data, and the Personal Consumption Expenditures (PCE) Deflator, the Federal Reserve’s (Fed’s) preferred gauge of inflation. As of 6:58 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 5.00%, while the 30-year bond yield is also falling two basis points (0.02%) to 5.32%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down one basis point (0.01%) to 4.69%. 

Treasury yields were mixed on Wednesday following the Fed’s policy meeting yesterday, as policymakers voted 10-2 to hold the benchmark interest rate steady at a range of 3.75% to 4.00%. During the post-meeting press conference, Fed Chair Kevin Warsh noted that most policymakers do not believe the economy is overheating and stated that the Fed remains focused on its 2% inflation target. Meanwhile, the advance goods trade deficit unexpectedly widened to $134.9 billion in September. Additionally, the preliminary reading of wholesale inventories rose by a stronger-than-expected 0.6% month-over-month (MOM), while retail inventories increased 0.3% MOM, in line with expectations. The yield on the 10-year note was up two basis points (0.02%) to 5.02%, while the 30-year bond yield rose three basis points (0.03%) to 5.34%. The yield on the two-year note decreased four basis points (0.04%) to 4.70%.

On the data front, personal income is expected to have increased 0.3% MOM in September, versus the prior month’s increase of 0.2%, while personal spending is expected to have increased 0.6% MOM in September compared to the prior month’s increase of 0.9%. The PCE deflator for September is expected to have accelerated to 0.5% MOM and 3.6% year-over-year (YOY) from the prior month’s 0.3% and 3.4%, respectively. Meanwhile, the core PCE deflator for September is expected to have also increased 0.3% MOM and 3.1% YOY, accelerating from the prior month’s 0.2% and 3.0% YOY, respectively. Initial jobless claims for the week ending October 24 are expected to come in at 198,000, higher than the prior week’s 194,000, while continuing claims are expected to come in at 1.720 million for the week ending October 17, down from the prior week’s 1.728 million. The advance reading of third-quarter GDP, the GDP Price Index, the core PCE Price Index, and personal consumption are expected to come in at annualized growth rates of 3.2%, 3.2%, 2.4%, and 3.4%, respectively, compared to the prior quarter’s annualized increases of 2.2%, 6.1%, 3.3%, and 3.8%, respectively. 

In the auction space, the U.S. Treasury is set to issue $110 billion in eight-week bills, $115 billion in four-week bills, and $44 billion in seven-year notes.

The Bloomberg 30-day visible supply fell $868 million to $12.399 billion on Wednesday, compared to the 12-month average of $15.726 billion.

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