Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Friday following President Donald Trump announcing his administration cannot meet with every country for trade negotiations and will instead set tariff rates for many trade partners. Investors are looking forward to today’s data releases including the University of Michigan’s preliminary May consumer sentiment and inflation data along with April housing market data. As of 6:50 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 4.41%, while the 30-year bond yield is also falling two basis points (0.02%) to 4.87%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 3.94%.

Treasury yields were lower on Thursday as retail sales for April increased slightly month-over-month (MOM) while industrial production remained unchanged contrary to anticipated growth. Meanwhile, the headline Producer Price Index for April dropped MOM against predictions of an uptick and cooled more than projected year-over-year (YOY). Initial jobless claims rose more than forecasted while continuing claims rose less than expected. The yield on the 10-year note was down 11 basis points (0.11%) to 4.43%, while the 30-year bond yield fell eight basis points (0.08%) to 4.89%. The yield on the two-year note decreased nine basis points (0.09%) to 3.96%.

On the data front, housing starts are expected to have been an annualized 1.36 million in April versus the prior month’s 1.32 million, corresponding to a MOM increase of 3.0% versus the prior month’s decline of 11.4%. The preliminary reading of April building permits is expected to come in at an annualized 1.45 million versus the prior month’s 1.47 million, corresponding to a MOM decrease of 1.2% versus the prior month’s increase of 0.5%. Import prices are expected to decline by 0.3% MOM and 0.2% YOY in April, versus the prior month’s decrease of 0.1% and increase of 0.9%, respectively. Meanwhile, export prices are expected to have fallen 0.4% MOM in April, versus coming in flat the prior month. The University of Michigan’s preliminary May reading of consumer sentiment is forecasted to come in at 53.5, higher than the prior month’s 52.5. The one- and 5-10-year inflation expectations for May from the University of Michigan are expected to come in at 6.50% and 4.40%, respectively, similar to the prior month’s readings.

In the central bank space, Federal Reserve (Fed) Bank of Richmond President Tom Barkin and San Francisco Fed President Mary Daly are scheduled to speak today.

Mortgage rates were lower in the latest week. For the week ending May 15, the average 30-year fixed mortgage rate was up five basis points (0.05%) to 6.81%, versus 7.02% a year ago. The 15-year fixed mortgage rate increased three basis points (0.03%) to 5.92%, versus 6.28% a year ago.

The Bloomberg 30-day visible supply fell $1.681 billion to $18.098 billion on Thursday, compared to the 12-month average of $13.140 billion.

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