Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Monday ahead of Federal Reserve (Fed) Chair Jerome Powell’s comments at a conference in Washington. Investors are also looking forward to today’s May manufacturing purchasing managers’ index (PMI) data release from the Institute for Supply Management (ISM) and a finalized reading from S&P Global. As of 6:47 AM ET, the yield on the 10-year note is rising three basis points (0.03%) to 4.43%, while the 30-year bond yield is also 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 3.91%.

Treasury yields were mixed on Friday as personal income growth came in higher-than-forecasted, while personal spending growth eased as projected. The Personal Consumption Expenditures Deflator, the Fed’s preferred gauge of inflation, came in as expected month-over-month (MOM) for both the headline and core measures, showing decelerations on annual bases. The finalized reading of May consumer sentiment from the University of Michigan was revised slightly higher, following downwardly revised one- and 5-10-year inflation expectations. The yield on the 10-year note was down two basis points (0.02%) to 4.40%, while the 30-year bond yield rose one basis point (0.01%) to 4.93%. The yield on the two-year note decreased four basis points (0.04%) to 3.90%.

On the data front, the finalized reading of S&P Global’s manufacturing PMI for May is expected to remain unchanged from the prior reading of 52.3. The Institute for Supply Management’s May manufacturing PMI and prices paid component are expected to come in at 49.5 and 69.0, respectively, versus the prior month’s 48.7 and 69.8, respectively. Construction spending is projected to have risen 0.2% month-over-month (MOM) in April, versus the prior month’s decrease of 0.5%.

In the auction space, the U.S. Treasury is set to issue $76 billion in 13-week bills and $68 billion in 26-week bills.

In the central bank space, Fed Chair Jerome Powell, Chicago Fed President Austan Goolsbee, and Dallas Fed President Lorie Logan are scheduled to speak today.

Mortgage rates were higher in the latest week. For the week ending May 29, the average 30-year fixed mortgage rate was up three basis points (0.03%) to 6.89%, versus 7.03% a year ago. The 15-year fixed mortgage rate increased two basis points (0.02%) to 6.03%, versus 6.36% a year ago.

The Bloomberg 30-day visible supply rose $318 million to $23.996 billion on Friday—a 12-month high--compared to the 12-month average of $13.455 billion.

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