Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Wednesday, ahead of the Federal Reserve’s (Fed’s) latest policy decision. While a rate cut is almost certain, investors are split on how large the reduction will be. As of 6:48 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 3.66%, while the 30-year bond yield is increasing two basis points (0.02%) to 3.98%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up two basis points (0.02%) to 3.62%.

Treasury yields were higher on Tuesday, as investors evaluated August’s retail sales and industrial production. The former increased slightly, compared to an anticipated decrease, while the latter increased more than projections. The yield on the 10-year note was up three basis points (0.03%) to 3.65%, while the 30-year bond yield also rose three basis points (0.03%) to 3.96%. The yield on the two-year note increased five basis points (0.05%) to 3.60%.

On the data front today, the Federal Open Market Committee (FOMC) is expected to reduce the target federal funds rate range by 0.25% from 5.25%-5.50% to 5.00%-5.25%. Mortgage Bankers Association (MBA) mortgage applications increased 14.2% for the week ending September 13 versus the prior week’s increase of 1.4%. Housing starts for August are expected to be an annualized 1.32 million units, up from the prior month’s 1.24 million units, corresponding to an anticipated increase of 6.5% month-over-month (MoM) versus the prior month’s decrease of 6.8%. Meanwhile, August’s building permits issued are projected to be an annualized 1.41 million, up slightly from the prior month’s revised 1.40 million, corresponding to an expected increase of 1.0% MoM versus the prior month’s revised decrease of 3.3%. Department of Energy (DOE) crude oil inventories are anticipated to decrease by 100,000 barrels for the week ending September 13 versus the prior week’s increase of 833,000 barrels. Treasury International Capital (TIC) foreign net transactions and net monthly inflows for July are also scheduled to be released today.

In the auction space, the U.S. Treasury is set to issue $60 billion in 17-week bills.

In the central bank space, Fed Chair Jerome Powell is scheduled to hold a press conference following the FOMC meeting concluding today.

The Bloomberg 30-day visible supply rose $672 million to $16.213 billion on Tuesday, above the 12-month average of $10.509 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.