Bond Market Commentary

Updates on bond market data, news, and activity each day.

December 9, 2016

Thursday's Action

Treasuries declined on Thursday. Yields of U.S. government debt rose following the European Central Bank’s decision to reduce monthly asset purchases starting in April. The ECB will reduce bond-buying from $86 billion to $64.6 billion a month, but will extend purchases until December 2017. The Treasury yield curve between five and 30 years steepened after ECB President Mario Draghi said the risk of euro-area deflation has largely disappeared. Benchmark 10-year notes were last down 14/32 to yield 2.39%. Shorter-dated two-year paper slipped 1/32 to yield 1.10%. At the long end of the curve, the 30-year bond was one point and 7/32 lower to yield 3.09%.

Mortgage Rates

The 10-year Treasury yield declined modestly this week following the release of the Job Openings and Labor Turnover Survey. According to the most recent Freddie Mac Primary Mortgage Market Survey (PMMS), since Election Week, the 30-year mortgage rate has increased a total of 56 basis points. Investors now turn their attention to next week’s FOMC meeting, with futures currently pricing a 100% possibility of an interest rate increase, according to Bloomberg data. For the period ending December 8, the average 30-year fixed-rate mortgage rose five points to 4.13%, compared to 3.95% this time in 2015. The 15-year fixed-rate mortgage average was 3.36%, up from 3.34% last week and compared to 3.19% a year ago. Five-year hybrid adjustable-rate mortgages (ARM) increased to 3.17%, up from 3.15% in the previous period and compared to 3.03% at this time last year.

Municipal Market Commentary

Thursday, municipal market indices were slightly weaker. Tax-exempt new issue supply is expected to total approximately $9.6 billion this week above the 2016 weekly average of $8.2 billion. The Bloomberg 30-day visible supply fell $3.364 billion to $10.901 billion on Thursday, below the 12-month average of $12.516 billion. The total is comprised of $1.236 billion of competitive bonds and $9.664 billion of negotiated bonds.

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.

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