Bond Market Commentary

May 7, 2021

The Treasury yield curve is modestly flattening ahead of the opening bell as market participants await the all-important "first Friday" jobs report from the Labor Department. The update at 8:30 am ET is expected to show the U.S. economy added 1 million jobs in April, after gaining 916,000 in March which was the biggest increase since August. The unemployment rate is poised to tick down to 5.8% from the prior 6.0% figure in March. This morning, the yield on the benchmark 10-year note is down one basis point to 1.56%, and is headed for a seven basis points weekly decline. The yield on the 30-year bond is unchanged at 2.24%, while the two-year note yield is up one basis point to 0.16%. Investors are also continuing to assess the Federal Reserve's semi-annual financial stability report released yesterday, which warned that signs of mounting risk appetite from investors are creating an environment in which asset prices may be susceptible to "significant declines." Bond markets took the report in stride on Thursday, with Treasuries trading in a narrow range for the day. The yield on the benchmark 10-year note held steady, while the 30-year bond rate ticked down one basis point to 2.24%. Investors also assessed first-time jobless claims data, which showed the number of Americans filing unemployment fell below 500,000 in the latest week for the first time since the pandemic began. Continuing claims, however, unexpectedly rose to 3.69 million from the prior week's 3.65 million figure.

Mortgage rates declined in the most recent week, with the 30-year fixed rate remaining below 3% for the third straight week and at its lowest level since mid-February, according to the Freddie Mac Primary Market Mortgage Survey® (PMMS®). For the period ending May 6, 2021, the 30-year fixed rate was down two basis points to 2.96%, still above its record low of 2.65% reached in early January. This compares to 3.26% at this time last year. The 15-year fixed mortgage rate declined one basis point to 2.30%, versus 2.73% a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 2.70%, bucking the downtrend to rise six basis points this week and compares to 3.17% at this time last year.

The Bloomberg 30-day visible supply fell $3.030 billion to $8.224 billion on Thursday, below the 12-month average of $12.390 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.

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