Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Wednesday as markets evaluate the latest strikes between the U.S. and Iran. Meanwhile, investors are looking forward to today’s May services purchasing managers’ index (PMI) data, measure of May employment, and the Federal Reserve’s (Fed’s) Beige Book. As of 6:56 AM ET, the yield on the 10-year note is rising four basis points (0.04%) to 4.48%, while the 30-year bond yield is increasing two basis points (0.02%) to 4.98%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up three basis points (0.03%) to 4.07%. 

Treasury yields were little changed on Tuesday as the April Job Openings and Labor Turnover Survey showed job openings unexpectedly rising to 7.62 million from an upwardly revised 6.89 million in April. The yield on the 10-year note was down one basis point (0.01%) to 4.44%, while the 30-year bond yield also fell one basis point (0.01%) to 4.96%. The yield on the two-year note increased one basis point (0.01%) to 4.04%.

On the data front, the Mortgage Bankers Association’s gauge of mortgage applications fell 2.5% for the week ending May 29 versus the prior week’s decrease of 8.5%. The Automatic Data Processing National Employment Report for May is expected to show private job gains of 120,000, versus the prior month’s 109,000. The finalized S&P Global services PMI for May is projected to come in at 51.0 from the preliminary reading of 50.9, while the composite PMI is expected to remain unchanged from the preliminary reading of 51.7. The Institute for Supply Management’s May services PMI and the prices paid component are expected to register 53.8 and 72.3, respectively, versus the prior month’s 53.6 and 70.7, respectively. April’s factory orders are expected to have increased 4.6% month-over-month (MOM) versus the prior month’s increase of 1.5%. April’s finalized durable goods orders are expected to show an increase of 7.9% MOM, unchanged from the preliminary reading. The Department of Energy’s reading of crude oil inventories is expected to show a decrease of 3.05 million barrels for the week ending May 29, versus the prior week’s decline of 3.33 million.

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

In the central bank space, Fed Governor Michael Barr and Dallas Fed President Lorie Logan are scheduled to speak today.

The Bloomberg 30-day visible supply rose $3.546 billion to $25.096 billion on Tuesday, above the 12-month average of $13.929 billion.

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