Bond Market Commentary

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

October 27, 2016

Wednesday’s Action

Treasuries declined on Wednesday. Yields of U.S. government debt rose after a report showed the U.S. service sector expanded more than forecast, boosting the outlook for economic growth. Yields on two-year notes rose for a fifth day amid increasing speculation the Federal Reserve will raise interest rates by the end of the year. On Wednesday, BlackRock’s chief investment officer Rick Rieder stated he’s certain a rate hike will come in December. Benchmark 10-year notes were last down 10/32 to yield 1.79%. Shorter-dated two-year paper fell 4/32 to yield 0.87%. At the long end of the curve, the 30-year bond was 24/32 lower to yield 2.53%.

Treasury Auction

The U.S. Treasury continued this week's auctions with the sale of $34 billion of five-year notes. The offering came to market drawing a yield of 1.303%.The bid-to-cover was 2.49, above the 2.42 average for the previous six sales of the maturity, indicating stronger demand.

Municipal Market Commentary

Wednesday, municipal market indices were slightly weaker, particularly on the long-end of the yield curve. According to Lipper FMI, U.S. municipal bond funds posted the first outflow in 55 weeks. As reported on October 19, net outflows were $135.9 million, compared with $147.3 million of net inflows the prior week. Tax-exempt new issue supply is expected to total approximately $13.8 billion this week, compared to last week’s $14.2 billion total and above the 2016 weekly average of $8.1 billion. The Bloomberg 30-day visible supply fell $1.773 billion to $18.524 billion on Wednesday, above the 12-month average of $12.484 billion. The total is comprised of $3.696 billion of competitive bonds and $14.828 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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