Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Thursday ahead of today’s Producer Price Index (PPI) for July and fresh unemployment claims data. As of 6:59 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 4.67%, while the 30-year bond yield is falling three basis points (0.03%) to 5.23%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 4.18%. 

Treasury yields were mixed on Wednesday as the headline Consumer Price Index (CPI) rose as expected in July, increasing 0.1% month-over-month (MOM) and 3.4% year-over-year (YOY), while core CPI also increased as expected, rising 0.2% MOM and 2.5% YOY. Meanwhile, the U.S. federal budget deficit for July widened more than forecasted. July’s average hourly earnings declined 0.2% YOY, while average weekly earnings increased 0.1% YOY. The yield on the 10-year note was unchanged at 4.69%, while the 30-year bond yield rose two basis points (0.02%) to 5.26%. The yield on the two-year note decreased one basis point (0.01%) to 4.20%.

On the data front, initial jobless claims for the week ending August 8 are expected to come in at 202,000, slightly higher than the prior week’s 199,000, while continuing claims are expected to come in at 1.79 million for the week ending August 1, down from the prior week’s 1.80 million. The headline PPI for July is expected to show price increases of 0.2% MOM and 4.9% YOY versus the prior month’s decrease of 0.3% and increase of 5.5%, respectively. The core PPI is expected to show price increases of 0.3% MOM and 4.1% YOY versus the prior month’s increases of 0.2% and 4.7%, respectively.

In the auction space, the U.S. Treasury is set to issue $110 billion in four-week bills, $100 billion in eight-week bills, and $25 billion in 30-year bonds.

In the central bank space, Federal Reserve (Fed) Bank of Richmond President Tom Barkin and Cleveland Fed President Beth Hammack are scheduled to speak today.

The Bloomberg 30-day visible supply fell $4.817 billion to $21.398 billion on Wednesday, above the 12-month average of $14.270 billion.

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