Bond Market Commentary

August 22, 2017

Monday’s Action

Treasuries strengthened on Monday as investors continued to favor perceived “safe haven” assets amid the recent uncertainty in the global markets. Benchmark 10-year notes were up 2/32 to yield 2.18%, the lowest level on a closing basis since June 26. The yield on Shorter-dated two-year paper slipped to 1.30% from 1.31% as of Friday’s close. At the long end of the curve, the 30-year bond was yield dipped to 2.76%.

Mortgage Rates

The 10-year Treasury yield ticked up one basis point this week. The 30-year mortgage rate similarly remained relatively flat, slipping just one point and lingering below the psychologically important 4 percent mark. According to the most recent Freddie Mac Primary Mortgage Market Survey (PMMS), mortgage rates are continuing to hold at low levels amidst ongoing economic uncertainty. For the period ending August 17, the average 30-year fixed-rate mortgage fell a point to 3.89%, compared to 3.43% this time in 2016. The 15-year fixed-rate mortgage average was 3.16%, down from 3.18% last week and compared to 2.74% a year ago. Five-year hybrid adjustable-rate mortgages (ARM) came in at 3.16%, up from 3.14% in the previous period and compared to 2.76% at this time last year.

Municipal Market Commentary

Monday, municipal market indices showed that muni bonds were slightly firmer. As reported on August 16, U.S. municipal bond funds posted net inflows of $586.8 million compared with $631.2 million of net inflows the prior week, according to Lipper FMI. Tax-exempt new issue supply is expected to total $3.9 billion this week, down from $6.8 billion the prior week and below the 2017 weekly average of $6.5 billion. The Bloomberg 30-day visible supply rose $247 million to $8.728 billion on Monday, below the 12-month average of $11.928 billion. The total is comprised of $1.163 billion of competitive bonds and $7.565 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 Bank, N.A., a bank affiliate of Wells Fargo & Company.