Bond Market Commentary

Over in bond land, Treasury yields are mixed before the opening bell Thursday as investors are focused on today’s key economic releases, including June personal income, personal spending, and Personal Consumption Expenditures (PCE) Deflator (the Federal Reserve’s [Fed’s] preferred gauge of inflation) data, as well as the advance reading of second-quarter gross domestic product (GDP). Investors are also assessing renewed fighting between the U.S. and Iran. As of 7:03 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.69%, while the 30-year bond yield is increasing three basis points (0.03%) to 5.23%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down one basis point (0.01%) to 4.26%.

Treasury yields were mixed on Wednesday following the Fed keeping their target rate unchanged at 3.50%–3.75% in a 9-3 vote, with the dissenters favoring a 25-basis point (0.25%) hike instead. Fed Chair Kevin Warsh said the bank remained committed to fighting inflation, though declined to provide forward guidance. The yield on the 10-year note was up seven basis points (0.07%) to 4.68%, while the 30-year bond yield rose 11 basis points (0.11%) to 5.20%. The yield on the two-year note decreased two basis points (0.02%) to 4.27%.

On the data front, personal income is expected to have increased 0.3% month-over-month (MOM) in June, slower than the prior month’s 0.7%, while personal spending is expected to have increased 0.4% MOM, also easing from the prior month’s 0.7%. The PCE deflator for June is expected to have decreased 0.1% MOM and increased 3.7% year-over-year (YOY), versus the prior month’s increases of 0.4% and 4.1%, respectively. Meanwhile, the core PCE deflator for June is expected to have decelerated to 0.2% MOM and 3.3% YOY, from the prior month’s 0.3% and 3.4% YOY, respectively. The advance reading of second-quarter GDP, the GDP Price Index, the core PCE Price Index, and personal consumption are expected to come in at annualized growth rates of 2.0%, 4.0%, 3.5%, and 2.3%, respectively, compared to the prior quarter’s annualized increases of 2.1%, 3.6%, 4.4%, and 0.5%, respectively. Initial jobless claims for the week ending July 25 are expected to come in at 200,000, higher than the prior week’s 187,000, while continuing jobless claims for the week ending July 18 are projected to come in at 1.795 million, slightly lower than the prior week’s 1.796 million.

In the auction space, the U.S. Treasury is set to issue $110 billion in four-week bills and $100 billion in eight-week bills.

The Bloomberg 30-day visible supply rose $3.842 billion to $23.239 billion on Wednesday, above the 12-month average of $14.052 billion.

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