Bond Market Commentary

Over in bond land, Treasury yields are mixed before the opening bell Friday ahead of today’s December Producer Price Index (PPI) and January’s Chicago purchasing managers’ index (PMI) data from Market News International (MNI). As of 6:59 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.25%, while the 30-year bond yield is increasing three basis points (0.03%) to 4.88%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 3.54%. 

Treasury yields were lower on Thursday as initial jobless claims came in higher than expected while continuing claims declined. The U.S. trade deficit widened more than expected in November, while factory orders for the month posted a larger than expected increase of 2.7% month over month (MOM). The yield on the 10-year note was down one basis point (0.01%) to 4.23%, while the 30-year bond yield also fell one basis point (0.01%) to 4.85%. The yield on the two-year note decreased one basis point (0.01%) to 3.56%. As of end of day Thursday (January 29), futures markets are pricing in four basis points (0.04%) worth of rate cuts at the Federal Reserve's (Fed) upcoming March meeting, with a cumulative 48 basis points (0.48%) worth of rate cuts by year-end 2026 and a cumulative 46 basis points (0.46%) worth of rate cuts by year-end 2027.

On the data front, the headline PPI for December is expected to show price increases of 0.2% MOM and 2.8% year-over-year (YOY) versus the prior month’s increases of 0.2% and 3.0%, respectively. The core PPI is expected to show price increases of 0.2% MOM and 2.9% YOY versus the prior month’s little change and rise of 3.0%, respectively. The MNI Chicago PMI for January is expected to come in at 43.7, up from the prior month’s 43.5.  

In the central bank space, Fed Vice Chair for Supervision Michelle Bowman, Fed Governor Stephen Miran, and St. Louis Fed President Alberto Musalem are scheduled to speak today.

Mortgage rates were higher in the latest week. For the week ending January 29, the average 30-year fixed mortgage rate was up one basis point (0.01%) to 6.10%, versus 6.95% a year ago. The 15-year fixed mortgage rate increased five basis points (0.05%) to 5.49%, versus 6.12% a year ago.

The Bloomberg 30-day visible supply rose $107 million to $11.192 billion on Thursday, below the 12-month average of $13.840 billion.

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