Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Monday as investors are looking forward to economic data from the Federal Reserve (Fed) Banks of Chicago and Dallas, along with July’s new home sales report. As of 6:45 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.27%, while the 30-year bond yield is increasing three basis points (0.03%) to 4.91%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up one basis point (0.01%) to 3.71%.

Treasury yields were lower on Friday following Fed Chair Jerome Powell’s speech at the Jackson Hole symposium indicating that a rate reduction could be on the table during the September policy meeting. He highlighted signs of economic deceleration and acknowledged the influence of trade and immigration measures. The yield on the 10-year note was down eight basis points (0.08%) to 4.25%, while the 30-year bond yield fell four basis points (0.04%) to 4.88%. The yield on the two-year note decreased nine basis points (0.09%) to 3.70%.

On the data front, the Chicago Fed’s National Activity Index for July is expected to come in at negative 0.11, down from the prior month’s negative 0.10. Meanwhile, new home sales are projected to have been at an annualized 630,000 pace in July versus the prior month’s 627,000 pace, corresponding to a 0.5% month-over-month (MOM) increase versus the prior month’s increase of 0.6%. The Dallas Fed’s Texas Manufacturing Outlook Survey for August will be released, with the general business activity index expected to come in at negative 1.7, down from the prior month’s 0.9. The finalized reading of July building permits will be released today, with the preliminary reading showing an annualized 1.35 million corresponding to a MOM decrease of 2.8%.

In the auction space, the U.S. Treasury is set to issue $82 billion in 13-week bills and $73 billion in 26-week bills.

In the central bank space, Dallas Fed President Lorie Logan and New York Fed President John Williams are scheduled to speak today.

Medium-term mortgage rates were lower in the latest week. For the week ending August 21, the average 30-year fixed mortgage rate was flat at 6.58%, versus 6.46% a year ago. The 15-year fixed mortgage rate decreased two basis points (0.02%) to 5.69%, versus 5.62% a year ago.

The Bloomberg 30-day visible supply fell $3.122 billion to $10.529 billion on Friday, below the 12-month average of $14.033 billion.

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