Bond Market Commentary

Over in bond land, Treasury yields are little changed before the opening bell Thursday as investors are anticipating today’s labor market releases, including weekly initial and continuing jobless claims, the October Challenger Job Report, and the preliminary third-quarter nonfarm productivity and unit labor costs. As of 7:00 AM ET, the yield on the 10-year note is unchanged at 4.89%, while the 30-year bond yield is falling one basis point (0.01%) to 5.27%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up one basis point (0.01%) to 4.59%. 

Treasury yields were lower on Wednesday as investors digested midterm results. Meanwhile, ADP’s measure of October private payrolls increased by a stronger-than-expected 86,000. The trade deficit unexpectedly narrowed to $105.0 billion in September, as exports increased by a greater-than-projected 1.9% month-over-month (MOM) and imports rose by a weaker-than-expected 1.2% MOM. The Institute for Supply Management services Purchasing Managers’ Index (PMI) declined more than forecasted to 54.5 in October, while the prices paid component unexpectedly fell to 73.0. Additionally, S&P Global’s finalized U.S. services PMI was revised lower to 56.1 from the preliminary reading of 57.9. The yield on the 10-year note was down seven basis points (0.07%) to 4.89%, while the 30-year bond yield fell five basis points (0.05%) to 5.28%. The yield on the two-year note decreased five basis points (0.05%) to 4.58%.

On the data front, the Challenger Report on job cuts for October showed a 71.3% year-over-year decline, with September having shown a decrease of 19.9%. Preliminary third-quarter nonfarm productivity growth is expected to come in at 2.7% quarter-over-quarter, versus the prior month’s increase of 1.4%, while unit labor costs are forecasted to have increased at an annualized 0.4% pace, down from the prior print of 1.2%. Initial jobless claims for the week ending October 31 are expected to come in at 196,000, higher than the prior week’s 194,000. Continuing claims are expected to rise slightly to 1.710 million for the week ending October 24 from the prior week’s 1.701 million. 

In the auction space, the U.S. Treasury is set to issue $110 billion in eight-week bills and $115 billion in four-week bills.

In the central bank space, Federal Reserve (Fed) Bank of Richmond President Tom Barkin, Cleveland Fed President Beth Hammack, and Dallas Fed President Lorie Logan are scheduled to speak today.

The Bloomberg 30-day visible supply rose $576.0 million to $12.423 billion on Wednesday, below the 12-month average of $15.768 billion.

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