Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Monday following strikes over the weekend by the U.S. and Israel on military and government targets in Iran. According to multiple media reports, casualties include Supreme Leader Ali Khamenei and other top officials. Iran retaliated with strikes against Israel, U.S. military bases, and other local targets in nearby countries. Along with continuing to assess the scope and impact of the fighting, markets will be watching for today’s February manufacturing purchasing managers’ index (PMI) data release from the Institute for Supply Management (ISM). Later in the week, investors will be looking toward February services PMIs on Wednesday and the February jobs report on Friday. As of 6:56 AM ET, the yield on the 10-year note is rising three basis points (0.03%) to 3.97%, while the 30-year bond yield is also increasing three basis points (0.03%) to 4.64%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up four basis points (0.04%) to 3.41%.

Treasury yields were lower on Friday as the headline and core Producer Price Index (PPI) climbed more than expected, rising by 0.5% and 0.8% month-over-month (MOM), respectively, while the year-over-year growth came in at 2.9% and 3.6%, respectively. Construction spending in November decreased, falling 0.2% MOM. The yield on the 10-year note was down six basis points (0.06%) to 3.94%, while the 30-year bond yield fell five basis points (0.05%) to 4.61%. The yield on the two-year note decreased six basis points (0.06%) to 3.37%.

On the data front, the finalized reading of S&P Global’s manufacturing PMI for February is expected to come in at 51.4 versus the prior reading of 51.2. Meanwhile, ISM’s manufacturing PMI and the prices paid component for February are expected to come in at 51.5 and 60.0, respectively, versus the prior month’s readings of 52.6 and 59.0, respectively.

In the auction space, the U.S. Treasury is set to issue $89 billion in 13-week bills and $77 billion in 26-week bills.

Mortgage rates were mixed in the latest week.
For the week ending February 26, the average 30-year fixed mortgage rate was down three basis points (0.03%) to 5.98%, versus 6.76% a year ago. The 15-year fixed mortgage rate increased 9 basis points (0.09%) to 5.44%, versus 5.94% a year ago.

The Bloomberg 30-day visible supply fell $1.357 billion to $11.988 billion on Friday, below the 12-month average of $13.930 billion.

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