Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Friday ahead of today’s release of the July jobs report and consumer credit data for June. As of 6:58 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 4.66%, while the 30-year bond yield is falling one basis point (0.01%) to 5.21%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 4.23%.

Treasury yields were higher on Thursday as markets evaluated details of the drafted Strait of Hormuz deal between Iran and Oman. Preliminary second-quarter nonfarm productivity unexpectedly accelerated to an annualized 1.4%, following an upwardly revised increase in the prior quarter, while unit labor costs came in lower than expected and remained unchanged from the previous quarter's downwardly revised pace of 1.3%. Meanwhile, both initial jobless and continuing claims for the week prior picked up. The yield on the 10-year note was up seven basis points (0.07%) to 4.68%, while the 30-year bond yield rose five basis points (0.05%) to 5.22%. The yield on the two-year note increased seven basis points (0.07%) to 4.25%. As of end of day Thursday (August 6), futures markets are pricing in 14 basis points (0.14%) worth of rate hikes at the Federal Reserve's (Fed’s) upcoming September meeting, with a cumulative 34 basis points (0.34%) worth of rate hikes by year-end 2026.

On the data front, July’s nonfarm payrolls are expected to expand by 80,000 versus the prior month’s 57,000, while manufacturing payrolls are projected to increase by 4,000 compared to the prior month’s 3,000. Average hourly earnings are projected to rise 0.3% month-over-month and 3.5% year-over-year for July, unchanged from the prior month’s increases. Meanwhile, July's unemployment rate is expected to remain unchanged at 4.2%, while the labor force participation rate is forecast to rise slightly to 61.6% from the previous month's 61.5%. The New York Fed will release their July Survey of Consumer Expectations, with the measure of one-year inflation expectations projected to come in at 3.69% from the prior month’s 3.67%. Consumer credit is expected to have expanded by $11.85 billion in June, rebounding from the prior month's $182 million decline.

In the central bank space, Richmond Fed President Tom Barkin is scheduled to speak today.

Mortgage rates were mixed in the latest week. For the week ending August 6, the average 30-year fixed mortgage rate was up three basis points (0.03%) to 6.69%, versus 6.63% a year ago. The 15-year fixed mortgage rate decreased three basis points (0.03%) to 6.01%, versus 5.75% a year ago.

The Bloomberg 30-day visible supply fell $2.320 billion to $18.402 billion on Thursday, above the 12-month average of $14.147 billion.

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