Bond Market Commentary

Over in bond land, Treasuries are strengthening ahead of the opening bell Friday as Wall Street tries to rebound from a major sell-off. The Federal Reserve’s (Fed) hawkish stance and turmoil in the U.K. markets has rattled investors this week, heightening volatility in stocks and bonds. The yield on the benchmark 10-year note is shedding eight basis points (0.08%) to 3.68%, while the 30-year bond yield is shedding seven basis points (0.07%) to 3.63%. The yield on the more policy-sensitive two-year note is dipping three basis points (0.03%) to 4.14% despite hawkish commentary from a slew of Fed officials. Yesterday, Treasuries weakened, with the yield on the 10-year note adding three basis points (0.03%) to 3.76%, while the 30-year bond yield climbed two basis points (0.02%) to 3.70%. The yield on the two-year note advanced five basis points (0.05%) to 4.17%. Initial jobless claims came in at its lowest point since April for the week ended September 24. Meanwhile, a third reading for second quarter Gross Domestic Product (GDP) was unchanged, while the personal consumption component of GDP and Core PCE (the Fed’s preferred proxy for inflation) were upwardly revised. The better-than-expected figures have increased the probability the Fed will maintain its aggressive stance and proceed with its rate hiking path. On the data front today, all eyes will be on the August reading of the PCE Core Deflator. The reading is expected to show a 4.70% year-over-year increase, up from July’s 4.60% print. Market participants can also expect August updates on personal income and spending. The September MNI Chicago Purchasing Managers’ Index (PMI) is expected to decline slightly to 51.80 from August’s 52.20 figure. Final readings of the September University of Michigan sentiment index and inflation expectations are forecasted to remain unchanged. In the central bank space, Fed officials are slated to speak throughout the day.

Mortgage rates rose in the latest week amid high volatility in the financial markets. For the week ending September 22, the average 30-year fixed rate mortgage added 41 basis points (0.41%) to 6.70%, its highest since 2007, versus 3.01% a year ago and compared to a record low of 2.65% set in January 2021. The 15-year rate advanced 52 basis points (0.52%) to 5.96%, in contrast to the 2.28% level at this time last year. Five-year Treasury indexed hybrid adjustable-rate mortgages averaged 5.30%, an increase of 33 basis points (0.33%) from last week and compared to 2.48% a year ago.

The Bloomberg 30-day visible supply fell $1.323 billion to $9.2 billion on Thursday, below the 12-month average of $11.224 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. Additional information available by request.

Wells Fargo Advisors is registered with the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority, but is not licensed or registered with any financial services regulatory authority outside of the U.S. Non-U.S. residents who maintain U.S.-based financial services account(s) with Wells Fargo Advisors may not be afforded certain protections conferred by legislation and regulations in their country of residence in respect of any investments, investment transactions or communications made with Wells Fargo Advisors.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.