Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Tuesday ahead of today’s economic releases, including May import and export price data, along with housing starts and preliminary building permit figures. Market participants are also looking ahead to tomorrow’s Federal Reserve (Fed) decision, with the central bank expected to hold their targeted federal funds rate steady at the current 3.50% to 3.75% range. As of 6:53 AM ET, the yield on the 10-year note is decreasing three basis points (0.03%) to 4.44%, while the 30-year bond yield is falling four basis points (0.04%) to 4.94%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 4.05%. 

Treasury yields were little changed on Monday as markets digested the U.S.-Iran ceasefire extension that was announced over the weekend. May’s industrial production showed smaller-than-projected increase of 0.1% month-over-month (MOM), while capacity utilization rose to 76.2%. A measure of May New York area manufacturing fell more than projected, while June homebuilder sentiment unexpectedly declined. The yield on the 10-year note was down one basis point (0.01%) to 4.47%, while the 30-year bond yield rose one basis point (0.01%) to 4.98%. The yield on the two-year note decreased one basis point (0.01%) to 4.07%.

On the data front, the May Import Price Index is projected to have increased 1.0% month-over-month (MOM) and 5.7% year-over-year (YOY), compared to the prior month’s 1.9% and 4.2%, respectively, while the Export Price Index is forecasted to have increased 0.9% MOM and 10.2% YOY, versus the prior month’s 3.3% and 8.8%, respectively. The New York Fed will release their Business Leaders Survey for June. Housing starts are expected to have been an annualized 1.430 million in May versus the prior month’s 1.465 million. The preliminary reading of May building permits is expected to come in at an annualized 1.418 million versus the prior month’s 1.423 million.

In the auction space, the U.S. Treasury is set to issue $65 billion in six-week bills and $13 billion in 20-year bonds.

The Bloomberg 30-day visible supply rose $4.120 billion to $16.963 billion on Monday, above the 12-month average of $13.810 billion.

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