Bond Market Commentary

Over in bond land, Treasury yields are mostly lower before the opening bell Thursday as the U.S. budget deficit took the spotlight, with the House of Representatives passing President Trump’s comprehensive domestic policy bill following the release of a revised version late Wednesday which helped unify the divided Republican Party. Investors are also looking forward to today’s preliminary purchasing managers’ index (PMI) data for May and updates on existing home sales and jobless claims. As of 6:47 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 4.58%, while the 30-year bond yield is unchanged at 5.09%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 4.00%.

Treasury yields were higher on Wednesday as investors awaited developments on the U.S. tax bill. The yield on the 10-year note was up 11 basis points (0.11%) to 4.60%, while the 30-year bond yield rose 12 basis points (0.12%) to 5.09%. The yield on the two-year note increased five basis points (0.05%) to 4.02%.

On the data front, the Federal Reserve (Fed) Bank of Chicago’s National Activity Index for April is expected to come in at negative 0.25, down from the prior month’s negative 0.03. Initial jobless claims for the week ending May 17 are expected to come in at 230,000, slightly higher than the prior week’s 229,000, while continuing claims are expected to come in at 1.882 million for the week ending May 10, up from the prior week’s 1.881 million. The preliminary reading of S&P Global’s composite PMI for May is expected to come in at 50.3 versus the prior month’s 50.6, with the manufacturing and services PMIs forecasted at 49.9 and 51.0, respectively, compared to the prior month’s 50.2 and 50.8, respectively. Existing home sales are forecasted to have been at an annualized 4.10 million pace in April, versus the prior month’s 4.02 million pace, corresponding to an increase of 2.0% versus the prior month’s decrease of 5.9%. The Kansas City Fed will release their Manufacturing Survey for May, with the composite index expected to come in at negative 5, down from the prior month’s negative 4.

In the auction space, the U.S. Treasury is set to issue $85 billion in four-week bills, $75 billion in eight-week bills, and $18 billion in 10-year Treasury Inflation-Protected Securities.

In the central bank space, Richmond Fed President Tom Barkin and New York Fed President John Williams and are scheduled to speak today.

None at this time.

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