Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Friday as investors question the sustainability of artificial intelligence (AI) spending. Meanwhile, today’s economic events include the third-quarter Employment Cost Index and a slew of Federal Reserve (Fed) speakers scheduled for today. Looking ahead, investors will focus on next week’s Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) releases early in the week, followed by the jobs report and the preliminary University of Michigan consumer sentiment reading on Friday. As of 7:03 AM ET, the yield on the 10-year note is decreasing three basis points (0.03%) to 4.91%, while the 30-year bond yield is falling two basis points (0.02%) to 5.28%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down three basis points (0.03%) to 4.57%. 

Treasury yields were lower on Thursday as personal income and personal spending rose less than expected in September, increasing 0.2% and 0.5% month-over-month (MOM), respectively. Meanwhile, the Personal Consumption Expenditures (PCE) Price Index rose 0.5% MOM and 3.6% year-over-year (YOY), both in line with expectations, while the core PCE Price Index increased 0.3% MOM and 3.1% YOY, also matching expectations. The advanced reading of third-quarter gross domestic product (GDP) showed the economy expanding more than expected at an annualized rate of 3.4%, while personal consumption rose 3.8%, similar to the prior quarter’s growth. Initial jobless claims came in lower than expected, while continuing claims for the prior week eased. The yield on the 10-year note was down eight basis points (0.08%) to 4.94%, while the 30-year bond yield fell four basis points (0.04%) to 5.30%. The yield on the two-year note decreased 10 basis points (0.10%) to 4.60%. As of end of day Thursday (October 29), futures markets are pricing in 19 basis points (0.19%) worth of rate hikes at the Fed’s upcoming December meeting, with a cumulative 55 basis points (0.55%) worth of rate hikes by year-end 2027.

On the data front, the third-quarter Employment Cost Index is projected to decelerate to 0.8% quarter-over-quarter compared to the prior reading of 0.9%. The Market News International Chicago PMI for October is expected to come in at 56.0, down from the prior month’s 58.8.

In the central bank space, Richmond Fed President Tom Barkin, San Francisco Fed President Mary Daly, and St. Louis Fed President Alberto Musalem are scheduled to speak today.

Mortgage rates were lower in the latest week. For the week ending October 29, the average 30-year fixed mortgage rate was down eight basis points (0.08%) to 7.24%, versus 6.17% a year ago. The 15-year fixed mortgage rate decreased eight basis points (0.08%) to 6.60%, versus 5.41% a year ago.

The Bloomberg 30-day visible supply rose $107 million to $12.506 billion on Thursday, compared to the 12-month average of $15.738 billion.

This information is obtained from sources and data considered to be reliable, but its accuracy and completeness is not guaranteed by Wells Fargo Advisors. Additional information available by request.

Wells Fargo Advisors is registered with the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority, but is not licensed or registered with any financial services regulatory authority outside of the U.S. Non-U.S. residents who maintain U.S.-based financial services account(s) with Wells Fargo Advisors may not be afforded certain protections conferred by legislation and regulations in their country of residence in respect of any investments, investment transactions or communications made with Wells Fargo Advisors.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.