Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Thursday as investors continue awaiting details on a deal to open the Strait of Hormuz. Market participants are also looking forward to labor market data, including today’s update on unemployment claims and the preliminary readings of second quarter nonfarm productivity growth and unit labor costs, as well as looking ahead to tomorrow’s July jobs report. As of 7:02 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.62%, while the 30-year bond yield is also increasing one basis point (0.01%) to 5.18%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up two basis points (0.02%) to 4.20%.

Treasury yields were mostly unchanged on Wednesday as the Automatic Data Processing National Employment Report for July showed private payrolls increasing by 44,000, below expectations. The Institute for Supply Management’s services purchasing managers’ index (PMI) for July rose slightly to 54.1, falling short of expectations, while the prices paid component unexpectedly increased to 70.3. Meanwhile, S&P Global’s finalized services and composite PMIs for July were both revised slightly upward to 54.6 and 54.5, respectively. The yield on the 10-year note was unchanged at 4.61%, while the 30-year bond yield was also unchanged at 5.17%. The yield on the two-year note decreased one basis point (0.01%) to 4.18%.

On the data front, the Challenger Report on job cuts for July showed a decline of 46.1% year-over-year compared to prior month’s decrease of 4.5%. Preliminary second-quarter nonfarm productivity growth is expected to come in at 0.6% quarter-over-quarter, versus the prior quarter’s increase of 0.3%, while unit labor costs are forecasted to have increased at an annualized 2.1% pace, following an annualized 1.8% increase in the prior quarter. Initial jobless claims for the week ending August 1 are expected to come in at 205,000, higher than the prior week’s 197,000, while continuing jobless claims for the week ending July 25 are projected to come in at 1.789 million, slightly higher than the prior week’s 1.782 million. The finalized June reading of wholesale inventories is expected to show an increase of 0.3% month-over-month, unchanged from the preliminary reading.

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.

In the central bank space, Federal Reserve Bank of St. Louis President Alberto Musalem is scheduled to speak today.

The Bloomberg 30-day visible supply fell $3.220 billion to $20.722 billion on Wednesday, above the 12-month average of $14.149 billion.

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