Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Thursday as investors are looking forward to today’s unemployment claims data and finalized first-quarter nonfarm productivity and unit labor costs, as well as looking ahead to tomorrow’s May jobs report.  As of 6:53 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 4.47%, while the 30-year bond yield is falling one basis point (0.01%) to 4.98%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down three basis points (0.03%) to 4.05%. 

Treasury yields were higher on Wednesday following waning hopes for a peace deal between the U.S. and Iran as fighting continued in the region. The Federal Reserve’s (Fed’s) Beige Book highlighted growing economic concerns amid rising inflation. The ADP Employment Change Report showed private payroll gains for May rising more than forecasted. Meanwhile, the Institute for Supply Management’s services purchasing managers’ index (PMI) increased to 54.5, surpassing expectations, while the prices paid component came in lower than expected at 71.3. In addition, April factory orders rose 4.8% month-over-month, exceeding forecasts. The yield on the 10-year note was up five basis points (0.05%) to 4.49%, while the 30-year bond yield rose three basis points (0.03%) to 4.99%. The yield on the two-year note increased four basis points (0.04%) to 4.08%.

On the data front, the Challenger Report for May showed job cuts rising 3.4% year-over-year compared to the prior month’s decline of 20.9%. Finalized first-quarter nonfarm productivity growth is expected to come in at 0.4% quarter-over-quarter, down from the preliminary print of 0.8%, while unit labor costs are forecasted to have increased at an annualized 2.4% pace, up from the preliminary print of 2.3%. Initial jobless claims for the week ending May 30 are expected to come in at 215,000, similar to the previous week, while continuing claims are projected to ease slightly to 1.78 million for the week ending May 23 from 1.79 million.

In the auction space, the U.S. Treasury is set to issue $75 billion in four-week bills and $75 billion in eight-week bills.

In the central bank space, Fed Vice Chair for Supervision Michelle Bowman, Richmond Fed President Tom Barkin, San Francisco Fed President Mary Daly, and Kansas City Fed President Jeffrey Schmid are scheduled to speak today.

The Bloomberg 30-day visible supply fell $2.882 billion to $23.214 billion on Wednesday, above the 12-month average of $13.929 billion.

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