Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Thursday as investors await today’s September Producer Price Index (PPI) and retail sales reports, fresh unemployment claims data, and comments from Federal Reserve (Fed) Chair Kevin Warsh. Investors are also digesting yesterday’s inflation data and earnings from several artificial intelligence companies. As of 6:55 AM ET, the yield on the 10-year note is decreasing 11 basis points (0.11%) to 5.08%, while the 30-year bond yield is falling nine basis points (0.09%) to 5.43%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down seven basis points (0.07%) to 4.73%. 

Treasury yields were mixed on Wednesday as the headline Consumer Price Index (CPI) accelerated to 0.6% month-over-month (MOM) in September, in line with expectations, while rising more than expected to 3.7% year-over-year (YOY). The core CPI (which excludes food and energy) increased 0.3% MOM and 2.6% YOY in September, both above expectations. The Fed October Beige Book showed a modest increase in economic activity, continued upward price pressures, and a broadly steady labor market environment. The yield on the 10-year note was down two basis points (0.02%) to 5.19%, while the 30-year bond yield fell four basis points (0.04%) to 5.52%. The yield on the two-year note increased one basis point (0.01%) to 4.80%.

On the data front, retail sales are expected to have risen 0.3% MOM in September versus the prior month’s downwardly revised increase of 1.1%, while retail sales excluding autos are forecasted to have risen 0.5% MOM versus the prior month’s downwardly revised increase of 1.3%. The New York Fed will release their October Empire State Manufacturing Survey, with the headline general business conditions index expected to come in at 12.0, up from the prior month’s 7.6. The Philadelphia Fed will release their October Manufacturing Business Outlook Survey, with the diffusion index of current general activity forecasted to fall to 28.0 from the prior month’s 37.8. Initial jobless claims for the week ending October 10 are expected to come in at 200,000, higher than the prior week’s 197,000, while continuing claims are expected to come in at 1.709 million for the week ending October 3, down from the prior week’s 1.716 million. The headline PPI for September is expected to show price increases of 0.6% MOM and 5.4% YOY versus the prior month’s increases of 0.4% and 5.4%, respectively. The core PPI, which excludes volatile components like food and energy, is expected to show price increases of 0.3% MOM and 4.4% YOY versus the prior month’s increases of 0.2% and 4.6%, respectively. Business inventories are expected to have risen 0.4% MOM in August compared to the prior month’s increase of 0.8%. The Department of Energy’s measure of crude oil inventories is expected to have increased by 150,000 barrels for the week ending October 9 versus the prior week’s decrease of 3.186 million barrels.

In the auction space, the U.S. Treasury is set to issue $110 billion in four-week bills and $105 billion in eight-week bills.

In the central bank space, Fed Chair Kevin Warsh, Chicago Fed President Austan Goolsbee, and Cleveland Fed President Beth Hammack are scheduled to speak today.

The Bloomberg 30-day visible supply rose $2.540 million to $17.429 billion on Wednesday, compared to the 12-month average of $15.662 billion.

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