Bond Market Commentary

Over in bond land, Treasury yields are mixed before the opening bell Friday following President Donald Trump increasing many tariff rates, including a 35% tariff on Canadian imports not covered by the U.S.-Mexico-Canada trade agreement. In terms of economic data, investors are awaiting the July jobs report and manufacturing purchasing managers’ index (PMI) from the institute for Supply Management (ISM). As of 6:47 AM ET, the yield on the 10-year note is rising three basis points (0.03%) to 4.40%, while the 30-year bond yield is also increasing three basis points (0.03%) to 4.93%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down one basis point (0.01%) to 3.95%.

Treasury yields were mostly unchanged on Thursday as the core Personal Consumption Expenditures Deflator, the Federal Reserve’s (Fed’s) preferred gauge of inflation, rose 0.3% month over month (MOM), as expected, but above forecasts year over year (YOY) with a 2.8% increase following upward revisions to the prior month. June’s personal income and personal spending both rose 0.3% MOM. Meanwhile, initial jobless claims ticked up and continuing claims came in lower than projected. The yield on the 10-year note was unchanged at 4.37%, while the 30-year bond yield was also unchanged at 4.90%. The yield on the two-year note increased two basis points (0.02%) to 3.96%.

On the data front, July’s nonfarm payrolls are expected to expand by 104,000 versus the prior month’s 147,000, while manufacturing payrolls are projected to show no change compared to the prior month’s decrease of 7,000. The unemployment rate is expected to tick up to 4.2% from the prior month’s 4.1%, while the labor force participation rate is expected to remain steady at 62.3%. Average hourly earnings are projected to rise 0.3% MOM and 3.8% YOY for July, compared to the prior month’s increases of 0.2% and 3.7%, respectively. The finalized reading of S&P Global’s manufacturing PMI for July is expected to come in at 49.7, slightly up from the previous reading of 49.5. ISM’s manufacturing PMI and prices paid component for July are expected to come in at 49.5 and 70.0, respectively, versus the prior month’s reading of 49.0 and 69.7, respectively. Construction spending is projected to show little change MOM in June, versus the prior month’s decrease of 0.3%. The finalized July reading of consumer sentiment from the University of Michigan is expected to come in at 62.0 versus the prior reading of 61.8, while one-year and 5-10-year inflation expectations are expected to come in at 4.4% and 3.6%, respectively, similar to the prior readings.

In the central bank space, Atlanta Fed President Raphael Bostic and Cleveland Fed President Beth Hammack are scheduled to speak today.

Mortgage rates were lower in the latest week. For the week ending July 31, the average 30-year fixed mortgage rate was down two basis points (0.02%) to 6.72%, versus 6.73% a year ago. The 15-year fixed mortgage rate decreased two basis points (0.02%) to 5.85%, versus 5.99% a year ago.

The Bloomberg 30-day visible supply fell $2.350 billion to $16.979 billion on Thursday, above the 12-month average of $14.062 billion.

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