Bond Market Commentary

Over in bond land, Treasury yields are mostly higher before the opening bell Friday ahead of today’s economic releases, including data on retail sales, industrial production, import prices, and consumer sentiment. As of 6:51 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.29%, while the 30-year bond yield is also increasing one basis point (0.01%) to 4.88%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 3.73%.

Treasury yields were higher on Thursday as markets refigured their Federal Reserve (Fed) rate cut expectations following a significantly hotter-than-expected July Producer Price Index report, wherein prices rose 0.9% month-over-month (MOM) and year-over-year (YOY) inflation accelerated to 3.3%. The yield on the 10-year note was up five basis points (0.05%) to 4.28%, while the 30-year bond yield rose four basis points (0.04%) to 4.87%. The yield on the two-year note increased six basis points (0.06%) to 3.73%.

On the data front, retail sales are expected to have risen 0.6% MOM in July, similar to the prior month’s increase, while retail sales excluding autos are forecasted to have risen 0.3% MOM versus the prior month’s 0.5%. The New York Fed will release their August Empire State Manufacturing Survey, with the headline general business conditions index expected to come in at 0.0 from the prior month’s positive 5.5. The July Import Price Index is projected to have increased 0.1% MOM and declined 0.2% YOY, both similar to the prior month’s changes, while the Export Price Index is forecasted to have increased 0.1% MOM and 2.5% YOY, easing from the prior month’s 0.5% and 2.8%, respectively. Industrial production is expected to be little changed in July versus the prior month’s increase of 0.3%, while capacity utilization is forecasted to remain steady at 77.6%. Business inventories are expected to have increased by 0.2% MOM in June versus the prior month’s no change. The University of Michigan’s preliminary August reading of consumer sentiment is forecasted to come in at 62.0, higher than the prior month’s 61.7. The one- and 5-10-year inflation expectations for August from the University of Michigan are expected to come in at 4.4% and 3.4%, respectively, compared to the prior month’s 4.5% and 3.4%, respectively.

In the central bank space, Chicago Fed President Austan Goolsbee is scheduled to speak today.

Mortgage rates were lower in the latest week. For the week ending August 14, the average 30-year fixed mortgage rate was down five basis points (0.05%) to 6.58%, versus 6.49% a year ago. The 15-year fixed mortgage rate decreased four basis points (0.04%) to 5.71%, versus 5.66% a year ago.

The Bloomberg 30-day visible supply fell $2.219 million to $12.8 billion on Thursday, below the 12-month average of $14.094 billion.

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