Bond Market Commentary

Over in bond land, Treasury yields are unchanged before the opening bell Wednesday ahead of today’s Federal Open Market Committee meeting, during which the Federal Reserve (Fed) is expected to keep its benchmark interest rate unchanged, though investors will analyze the updated Summary of Economic Projections and Fed Chair Kevin Warsh’s post-meeting press conference. Investors are also awaiting today’s key economic releases, including May retail sales, April business inventories, and May pending home sales data. As of 6:59 AM ET, the yield on the 10-year note is unchanged at 4.44%, while the 30-year bond yield is also unchanged at 4.94%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 4.05%.

Treasury yields were lower on Tuesday as import prices posted a stronger than anticipated increase in May, rising 1.9% month-over-month (MOM) and 6.7% year-over-year (YOY), while export prices also increased more than expected, climbing 1.3% MOM and 11.2% YOY. Meanwhile, U.S. housing starts for May fell to an annualized 1.18 million, while preliminary building permits came in at an annualized 1.41 million, marking a sharper-than-anticipated drop. The yield on the 10-year note was down three basis points (0.03%) to 4.44%, while the 30-year bond yield fell four basis points (0.04%) to 4.94%. The yield on the two-year note decreased two basis points (0.02%) to 4.05%.

On the data front, the Mortgage Bankers Association’s gauge of mortgage applications fell 3.8% for the week ending June 12 versus the prior week’s increase of 10.8%. Retail sales are expected to have risen 0.6% MOM in May versus the prior month’s increase of 0.5%, while retail sales excluding autos are forecasted to have risen 0.6% MOM versus the prior month’s 0.7%. Business inventories are expected to have risen 0.5% in April versus the prior month’s 0.9%. Pending home sales for May are expected to have increased 0.9% MOM versus the prior month’s increase of 1.4%. The Department of Energy’s measure of crude oil inventories is expected to have decreased by 3.00 million for the week ending June 12 versus the prior week’s decrease of 7.23 million barrels.

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

The Bloomberg 30-day visible supply fell $461 million to $16.502 billion on Tuesday, above the 12-month average of $13.820 billion.

This information is obtained from sources and data considered to be reliable, but its accuracy and completeness is not guaranteed by Wells Fargo Advisors. Additional information available by request.

Wells Fargo Advisors is registered with the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority, but is not licensed or registered with any financial services regulatory authority outside of the U.S. Non-U.S. residents who maintain U.S.-based financial services account(s) with Wells Fargo Advisors may not be afforded certain protections conferred by legislation and regulations in their country of residence in respect of any investments, investment transactions or communications made with Wells Fargo Advisors.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.