Bond Market Commentary

Over in bond land, Treasury yields are unchanged before the opening bell Tuesday ahead of today’s release of October consumer confidence and August home price data. The Federal Reserve’s (Fed’s) two-day meeting starts today, with a 25 basis point (0.25%) rate cut expected when the meeting concludes tomorrow. As of 6:55 AM ET, the yield on the 10-year note is unchanged at 3.98%, while the 30-year bond yield is also unchanged at 4.55%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 3.49%.

Treasury yields were mixed on Monday as the Dallas Fed’s Texas Manufacturing Outlook Survey showed the general business activity index for October posting a stronger-than-expected improvement, though still indicated weakening activity. The yield on the 10-year note was down two basis points (0.02%) to 3.98%, while the 30-year bond yield fell four basis points (0.04%) to 4.55%. The yield on the two-year note increased one basis point (0.01%) to 3.49%.

On the data front, the S&P Cotality Case-Shiller 20-City Home Price Index for August is expected to register a decrease of 0.10% month-over-month (MOM) and an increase of 1.30% year-over-year (YOY), versus the prior month’s decrease of 0.07% and increase of 1.82%, respectively. The Richmond Fed’s October Fifth District Survey of Manufacturing Activity will be released today, with the headline composite manufacturing index expected to improve to negative 12 from the prior month’s negative 17. The Conference Board’s reading of October consumer confidence is projected to come in at 93.4 versus the prior month’s 94.2. The Dallas Fed will release their Texas Service Sector Outlook Survey for October. The Federal Housing Finance Agency’s House Price Index for August may be delayed as the U.S. government shutdown continues.

In the auction space, the U.S. Treasury is set to issue $95 billion in six-week bills, $50 billion in 52-week bills, and $44 billion in seven-year notes.

The Bloomberg 30-day visible supply rose $1.134 billion to $8.270 billion on Monday, below the 12-month average of $13.642 billion.

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