Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Tuesday ahead of today’s economic releases, including July consumer confidence, June’s advance goods trade balance, and May home price data. Attention is also turning to the Federal Reserve (Fed) policy meeting, where tomorrow policymakers are expected to keep interest rates unchanged. As of 6:57 AM ET, the yield on the 10-year note is decreasing three basis points (0.03%) to 4.62%, while the 30-year bond yield is also falling three basis points (0.03%) to 5.11%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 4.30%. 

Treasury yields were lower on Monday as the preliminary reading of durable goods orders for June registered a smaller-than-expected increase of 0.3% month-over-month (MOM), compared to the prior month’s revised decrease of 4.0%. Meanwhile, markets evaluated a pause in strikes by the U.S. and Iran. The yield on the 10-year note was down three basis points (0.03%) to 4.65%, while the 30-year bond yield fell two basis points (0.02%) to 5.14%. The yield on the two-year note decreased one basis point (0.01%) to 4.32%.

On the data front, the advance goods trade balance for June is projected to show a deficit of $100.0 billion, lower than the prior month’s revised deficit of $105.9 billion. Meanwhile, the preliminary June reading of wholesale inventories is expected to show an increase of 0.4% MOM, compared to the prior month’s 0.1%, while retail inventories are forecasted to have increased by 0.4% MOM in June, versus the prior month’s increase of 0.6%. The Federal Housing Finance Agency’s House Price Index is expected to show an increase of 0.1% MOM in May, compared to the prior month’s 0.1% decrease. The S&P Cotality Case-Shiller 20-City Home Price Index for May is expected to show little change MOM and an increase of 1.30% year-over-year, versus the prior month’s decrease of 0.04% and increase of 1.14%, respectively. The Richmond Fed’s July Fifth District Survey of Manufacturing Activity will be released today, with the headline composite manufacturing index expected to improve to 6 from the prior month’s 4. The Conference Board’s reading of July consumer confidence is projected to come in at 92.4 versus the prior month’s 91.2. The Dallas Fed will release their Texas Service Sector Outlook Survey for July, with the general business activity index forecasted to improve to 3.8 from the prior month’s 2.9.

In the auction space, the U.S. Treasury is set to issue $95 billion in six-week bills and $44 billion in seven-year notes.

The Bloomberg 30-day visible supply rose $4.371 billion to $118.111 billion on Monday, above the 12-month average of $13.996 billion.

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