Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Wednesday as investors continue assessing the potential path of Federal Reserve (Fed) rate cuts following yesterday’s inflation data. As of 6:43 AM ET, the yield on the 10-year note is decreasing four basis points (0.04%) to 4.25%, while the 30-year bond yield is also falling four basis points (0.04%) to 4.84%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 3.71%.

Treasury yields were mixed on Tuesday as the July Consumer Price Index (CPI) decelerated to 0.2% month-over-month (MOM) and registered a smaller-than-expected increase of 2.7% year-over-year (YOY) on a headline basis. Meanwhile, the core CPI (which excludes food and energy) accelerated to 0.3% MOM and 3.1% YOY. The federal budget deficit came in higher-than-expected for July. The yield on the 10-year note was up one basis point (0.01%) to 4.29%, while the 30-year bond yield rose three basis points (0.03%) to 4.88%. The yield on the two-year note decreased four basis points (0.04%) to 3.73%.

On the data front, the Mortgage Banker Association’s gauge of mortgage applications increased by 10.9% for the week ending August 8 versus the prior week’s increase of 3.1%. The Department of Energy’s measure of crude oil inventories is expected to have decreased by 912,000 barrels for the week ending August 8 versus the prior week’s decrease of 3.03 million barrels.

In the auction space, the U.S. Treasury is set to issue $65 billion in 17-week bills.

In the central bank space, Richmond Fed President Tom Barkin, Atlanta Fed President Raphael Bostic, and Chicago Fed President Austan Goolsbee are scheduled to speak today.

The Bloomberg 30-day visible supply rose $1.587 billion to $17.697 billion on Tuesday, above the 12-month average of $14.084 billion.

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