Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Tuesday as trade talks between the U.S. and China continue and investors evaluate a stronger-than-expected reading on small business optimism. As of 6:45 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 4.45%, while the 30-year bond yield is falling three basis points (0.03%) to 4.91%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 3.98%.

Treasury yields were lower on Monday as the finalized April reading of wholesale inventories unexpectedly rose, though wholesale trade sales registered a greater-than-expected deceleration. The Federal Reserve Bank of New York’s measures of inflation expectations fell, with one-year ahead inflation expectations declining the most, down to 3.20% for May. The yield on the 10-year note was down four basis points (0.04%) to 4.47%, while the 30-year bond yield fell three basis points (0.03%) to 4.94%. The yield on the two-year note decreased four basis points (0.04%) to 4.00%.

On the data front, the National Federation of Independent Business’s gauge of small business optimism increased to 98.8 in May from the prior month’s 95.8.

In the auction space, the U.S. Treasury is set to issue $48 billion in 52-week bills, $55 billion in six-week bills, and $58 billion in three-year notes.

The Bloomberg 30-day visible supply fell $622 million to $19.979 billion on Monday, compared to the 12-month average of $13.655 billion.

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