Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Friday ahead of today’s release of the December jobs report. Investors will also be looking for the preliminary January reading of consumer sentiment from the University of Michigan and housing starts data. As of 6:55 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.19%, while the 30-year bond yield is increasing one basis point (0.01%) to 4.85%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up two basis points (0.02%) to 3.51%. 

Treasury yields were higher on Thursday as jobs cuts declined year-over-year (YOY) in December and jobless claims ticked up, while third-quarter nonfarm productivity accelerated from the prior quarter and unit labor costs fell. The U.S. trade deficit unexpectedly narrowed, and consumer credit showed a smaller-than-expected increase in November. The yield on the 10-year note was up two basis points (0.02%) to 4.17%, while the 30-year bond yield rose one basis point (0.01%) to 4.84%. The yield on the two-year note increased two basis points (0.02%) to 3.49%. As of end of day Thursday (January 8), futures markets are pricing in four basis points (0.04%) worth of rate cuts at the Federal Reserve's upcoming January meeting, with a cumulative 57 basis points (0.57%) worth of rate cuts by year-end 2026 and a cumulative 52 basis points (0.52%) worth of rate cuts by year-end 2027.

On the data front, December’s nonfarm payrolls are expected to expand by 70,000 versus the prior month’s 64,000, while manufacturing payrolls are projected to fall by 5,000, similar to the prior month’s decrease. Average hourly earnings are projected to rise 0.3% month-over-month (MOM) and 3.6% YOY for December, compared to the prior month’s increases of 0.1% and 3.5%, respectively. Meanwhile, the unemployment rate is expected to edge down to 4.5% in December from the prior month’s 4.6%, while the labor force participation rate is forecasted to ease to 62.4% from the prior month’s 62.5%. Housing starts are expected to have been an annualized 1.33 million in October, corresponding to an increase of 1.8% MOM. The preliminary reading of October building permits is expected to come in at an annualized 1.35 million, corresponding to an increase of 1.5% MOM. The University of Michigan’s preliminary January reading of consumer sentiment is forecasted to come in at 53.5, higher than the prior month’s 52.9. The one- and 5-10-year inflation expectations for January from the University of Michigan are expected to come in at 4.1% and 3.3%, respectively, compared to the prior month’s 4.2% and 3.2%, respectively. The Federal Reserve’s (Fed’s) measure of the household change in net worth for the third quarter is scheduled for release.

In the central bank space, Richmond Fed President Tom Barkin, Atlanta Fed President Raphael Bostic, and Minneapolis Fed President Neel Kashkari are scheduled to speak today.

Mortgage rates were higher in the latest week. For the week ending January 8, the average 30-year fixed mortgage rate was up one basis point (0.01%) to 6.16%, versus 6.93% a year ago. The 15-year fixed mortgage rate increased two basis points (0.02%) to 5.46%, versus 6.14% a year ago.

The Bloomberg 30-day visible supply fell $91 million to $12.164 billion on Thursday, below the 12-month average of $13.953 billion.

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