Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Thursday following comments from President Donald Trump indicating that countries trading with the U.S. will face tariffs between 15% and 50%. Investors are also looking forward to July’s purchasing managers’ index (PMI) data, along with June’s new home sales and fresh unemployment claims data. As of 6:45 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.40%, while the 30-year bond yield is increasing three basis points (0.03%) to 4.96%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up one basis point (0.01%) to 3.89%.

Treasury yields were higher on Wednesday as markets digested news of the U.S.-Japan trade deal and optimism for an agreement with the European Union grew with news indicating a possible 15% tariff rate. Existing home sales experienced a larger-than-expected decline in June to an annualized pace of 3.93 million. The yield on the 10-year note was up four basis points (0.04%) to 4.38%, while the 30-year bond yield rose one basis point (0.01%) to 4.93%. The yield on the two-year note increased five basis points (0.05%) to 3.88%.

On the data front, initial jobless claims for the week ending July 19 are expected to come in at 226,000, higher than the prior week’s 221,000, while continuing claims are expected to come in at 1.95 million for the week ending July 12, down from the prior week’s 1.96 million. The Federal Reserve Bank (Fed) of Chicago’s National Activity Index for June is expected to come in at negative 0.15, up from the prior month’s negative 0.28. The preliminary reading of S&P Global’s composite PMI for July is expected to come in at 52.8 versus the prior month’s 52.9, with the manufacturing and services PMIs forecasted at 52.7 and 53.0, respectively, compared to the prior month’s 52.9 and 52.9, respectively. Meanwhile, new home sales are projected to have been at an annualized 650,000 pace in June versus the prior month’s 623,000 pace, corresponding to a 4.3% month-over-month increase versus the prior month’s decrease of 13.7%. The Kansas City Fed will release their Manufacturing Survey for July, with the composite index expected to come in at a neutral reading of 0, up from the prior month’s negative 2. Meanwhile, the finalized reading of building permits for June are projected to come in roughly unchanged from the prior reading of an annualized pace of 1.40 million.

In the auction space, the U.S. Treasury is set to issue $95 billion in four-week bills, $85 billion in eight-week bills, and $21 billion in 10-year Treasury Inflation-Protected Securities.

The Bloomberg 30-day visible supply fell $2.629 billion to $15.987 billion on Wednesday, above the 12-month average of $14.009 billion.

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