Bond Market Commentary

Over in bond land, Treasury yields are mostly unchanged before the opening bell Wednesday ahead of today’s April Producer Price Index (PPI) data. As of 6:50 AM ET, the yield on the 10-year note is unchanged at 4.46%, while the 30-year bond yield is also unchanged at 5.02%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down one basis point (0.01%) to 3.98%.

Treasury yields were higher on Tuesday as the headline Consumer Price Index (CPI) eased to 0.6% month-over-month (MOM), matching expectations, but showed a greater-than-expected acceleration to 3.8% year-over-year (YOY). The core CPI (which excludes food and energy) accelerated to 0.4% MOM and 2.8% YOY in April, with both figures coming in higher-than-anticipated. The yield on the 10-year note was up five basis points (0.05%) to 4.46%, while the 30-year bond yield rose three basis points (0.03%) to 5.02%. The yield on the two-year note increased four basis points (0.04%) to 3.99%.

On the data front, the Mortgage Bankers Association’s gauge of mortgage applications rose 1.7% for the week ending May 8 versus the prior week’s decrease of 4.4%. The headline PPI is expected to rise 0.5% MOM and 4.8% YOY in April, versus the prior month’s 0.5% and 4.0%, respectively. The core PPI is expected to rise 0.3% MOM and 4.3% YOY in April, faster than the prior month’s 0.1% and 3.8%, respectively. The Department of Energy’s measure of crude oil inventories is expected to have decreased by 2.0 million barrels for the week ending May 8 versus the prior week’s decrease 2.3 million barrels.

In the auction space, the U.S. Treasury is set to issue $69 billion in 17-week bills and $25 billion in 30-year bonds.

In the central bank space, Kevin Warsh was confirmed as a Federal Reserve (Fed) Governor yesterday, with a vote for him to become Chair expected soon. Meanwhile, Boston Fed President Susan Collins, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan are scheduled to speak today.

The Bloomberg 30-day visible supply rose $341.5 million to $16.918 billion on Tuesday, above the 12-month average of $14.003 billion.

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