Bond Market Commentary

Over in bond land, Treasury yields are unchanged before the opening bell Monday as investors evaluated President Donald Trump’s new global 15% tariff following the Supreme Court striking down many of his previous tariff measures on Friday. As of 7:04 AM ET, the yield on the 10-year note is unchanged at 4.08%, while the 30-year bond yield is also unchanged at 4.72%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 3.48%. 

Treasury yields were higher on Friday as the Personal Consumption Expenditures Deflator, the Federal Reserve’s (Fed’s) preferred gauge of inflation, came in hotter-than-forecasted in December, with the headline measure rising 0.4% month-over-month (MOM) and 2.9% year-over-year (YOY), while the core measure increased 0.4% MOM and 3.0% YOY. Personal income rose by an as-expected 0.3% MOM, while personal spending posted a greater-than-expected increase of 0.4% MOM in December. The advance reading of fourth-quarter gross domestic product came in weaker-than-projected, with the economy growing at an annualized pace of 1.4%, while consumer spending growth met forecasts with a 2.4% annualized gain. Meanwhile, S&P Global’s preliminary February readings for the manufacturing and services purchasing managers’ indexes (PMIs) fell to 51.2 and 52.3, respectively. The yield on the 10-year note was up one basis point (0.01%) to 4.08%, while the 30-year bond yield rose two basis points (0.02%) to 4.72%. The yield on the two-year note increased two basis points (0.02%) to 3.48%.

On the data front, the Chicago Fed’s National Activity Index for January is expected to come in at negative 0.08, down from the prior month’s negative 0.04. December’s factory orders are expected to have decreased 0.6% MOM versus the prior month’s increase of 2.7%. December’s finalized durable goods orders are expected to show a decrease of 1.4% MOM, unchanged from the preliminary reading. The Dallas Fed’s Texas Manufacturing Outlook Survey for February will be released, with the general business activity index expected to come in at negative 0.8, up from the prior month’s negative 1.2.

In the auction space, the U.S. Treasury is set to issue $89 billion in 13-week bills and $77 billion in 26-week bills.

In the central bank space, Fed Governor Christopher Waller is scheduled to speak today.

Mortgage rates were lower in the latest week.
For the week ending February 19, the average 30-year fixed mortgage rate was down eight basis points (0.08%) to 6.01%, versus 6.85% a year ago. The 15-year fixed mortgage rate decreased 9 basis points (0.09%) to 5.35%, versus 6.04% a year ago.

The Bloomberg 30-day visible supply rose $626 million to $11.364 billion on Friday, below the 12-month average of $13.873 billion.

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