Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Wednesday ahead of today’s May Consumer Price Index (CPI) data. As of 6:48 AM ET, the yield on the 10-year note is rising three basis points (0.03%) to 4.50%, while the 30-year bond yield is increasing four basis points (0.04%) to 4.97%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up one basis point (0.01%) to 4.03%.

Treasury yields were mixed on Tuesday amid ongoing trade negotiations between the U.S. and China. The yield on the 10-year note was unchanged at 4.47%, while the 30-year bond yield fell one basis point (0.01%) to 4.93%. The yield on the two-year note increased two basis points (0.02%) to 4.02%.

On the data front, the Mortgage Banker Association’s gauge of mortgage applications increased by 12.5% for the week ending June 6 versus the prior week’s decrease of 3.9%. The headline CPI for May is expected to show price increases of 0.2% month-over-month (MOM), similar to the prior month’s change, and 2.4% year-over-year (YOY) versus the prior month’s increase of 2.3%. Meanwhile, core CPI is expected to show price increases of 0.3% MOM and 2.9% YOY, versus the prior month’s increases of 0.2% and 2.8%, respectively. The U.S. deficit for May is expected to narrow to $314.0 billion from the prior month’s $347.1 billion. The Department of Energy’s measure of crude oil inventories is expected to have decreased by 2.6 million barrels for the week ending June 6 versus the prior week’s decrease of 4.3 million barrels.

In the auction space, the U.S. Treasury is set to issue $60 billion in 17-week bills and $39 billion in 10-year notes.

The Bloomberg 30-day visible supply rose $33 million to $20.012 billion on Tuesday, compared to the 12-month average of $13.680 billion.

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