Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Thursday ahead of today’s fresh unemployment claims data, July advance goods trade balance, and preliminary July reading of wholesale inventories data. Markets will also be watching for news out of the Federal Reserve’s (Fed’s) annual Jackson Hole Economic Symposium, beginning today. As of 6:57 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.67%, while the 30-year bond yield is increasing one basis point (0.01%) to 5.18%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up two basis points (0.02%) to 4.23%. 

Treasury yields were mostly higher on Wednesday as personal income and personal spending in July rose 0.4% and 0.2% month-over-month (MOM), respectively, both exceeding expectations. Meanwhile, the July Personal Consumption Expenditures (PCE) Price Index increased 0.2% MOM and 3.7% year-over-year (YOY), slightly above forecasts, while the core PCE Price Index rose 0.2% MOM and 3.3% YOY, in line with expectations. Separately, the second estimate of second-quarter gross domestic product (GDP) growth was unchanged at an annualized 1.5%, matching forecasts, while personal consumption growth was revised higher to 3.4% from 3.2%. In addition, the preliminary reading of July durable goods orders increased 1.1% MOM. The yield on the 10-year note was up two basis points (0.02%) to 4.65%, while the 30-year bond yield was unchanged at 5.17%. The yield on the two-year note increased four basis points (0.04%) to 4.21%.

On the data front, the advance goods trade balance for July is expected to show a deficit of $100.5 billion, compared with the prior month’s revised deficit of $101.4 billion. The preliminary July reading of wholesale inventories is expected to show an increase of 0.2% MOM, matching the prior month's gain, while retail inventories are forecasted to have increased 0.2% MOM, following the prior month's revised 0.2% decline. Initial jobless claims for the week ending August 22 are expected to come in at 208,000, slightly above the prior week’s 206,000, while continuing claims for the week ending August 15 are expected to decline to 1.792 million from the prior week’s 1.799 million. The Kansas City Fed’s August composite index on manufacturing activity is expected to improve to 10, up from the prior month’s reading of 9.

In the auction space, the U.S. Treasury is set to issue $100 billion in four-week bills, $90 billion in eight-week bills, and $44 billion in seven-year notes.

The Bloomberg 30-day visible supply fell $2.736 billion to $24.177 billion on Wednesday, above the 12-month average of $14.628 billion.

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