Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Wednesday as oil prices continue easing and as investors are awaiting today’s economic measures from the Richmond and Dallas Federal Reserve (Fed) banks. Investors are also looking ahead to tomorrow’s update on inflation with the April Personal Consumption Expenditures Deflator. As of 6:59 AM ET, the yield on the 10-year note is decreasing one basis point (0.01%) to 4.47%, while the 30-year bond yield is also falling one basis point (0.01%) to 5.01%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down one basis point (0.01%) to 4.02%. 

Treasury yields were lower on Tuesday as investors evaluated U.S.-Iran peace deal progress. Meanwhile, May consumer confidence fell from the prior month’s upwardly revised reading. Measures of home prices for March came in at or below expectations, while the Chicago Fed’s National Activity Index for April improved more than expected. The yield on the 10-year note was down eight basis points (0.08%) to 4.48%, while the 30-year bond yield fell four basis points (0.04%) to 5.02%. The yield on the two-year note decreased nine basis points (0.09%) to 4.03%.

On the data front, the Mortgage Bankers Association’s gauge of mortgage applications decreased 8.5% for the week ending May 22 versus the prior week’s decrease of 2.3%. The Richmond Fed’s May Fifth District Survey of Manufacturing Activity will be released today, with the headline composite manufacturing index expected to rise to 4 from the prior month’s 3. The Dallas Fed will release their Texas Service Sector Outlook Survey for May, with the headline composite services index expected to improve to -6.0 from the prior month’s -9.9.

In the auction space, the U.S. Treasury is set to issue $69 billion in 17-week bills, $28 billion in two-year floating rate notes, and $70 billion in five-year notes.

In the central bank space, Fed Vice Chair Philip Jefferson, Fed Governor Lisa Cook, Chicago Fed President Austan Goolsbee, and Dallas Fed President Lorie Logan are scheduled to speak today.

The Bloomberg 30-day visible supply rose $1.105 billion to $18.168 billion on Tuesday, above the 12-month average of $13.944 billion.

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