Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Thursday as investors await today’s April Personal Consumption Expenditures (PCE) Deflator and react to the latest military strikes between the U.S. and Iran, dampening earlier peace-deal optimism. Additional economic updates include April’s personal income, personal spending, and new home sales, along with the second reading of first-quarter gross domestic product (GDP). As of 6:58 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.50%, while the 30-year bond yield is increasing one basis point (0.01%) to 5.02%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up three basis points (0.03%) to 4.06%. 

Treasury yields were mostly unchanged on Wednesday as oil prices continued declining following optimism over progress on a U.S.-Iran peace deal. The yield on the 10-year note was unchanged at 4.48%, while the 30-year bond yield fell one basis point (0.01%) to 5.01%. The yield on the two-year note was unchanged at 4.03%.

On the data front, April’s PCE Deflator is expected to rise 0.5% month-over-month (MOM) and 3.8% year-over-year (YOY) versus the prior month’s 0.7% and 3.5%, respectively. Meanwhile the core PCE Deflator is projected to increase 0.3% MOM and 3.3% YOY, compared to the prior month’s 0.3% and 3.2%, respectively. Personal income and personal spending are forecasted to rise 0.4% MOM and 0.5% MOM in April, respectively, slowing from the prior month’s 0.6% and 0.9% gains, respectively. The second reading of first-quarter GDP, personal consumption, the GDP Price Index, and the core PCE Price Index are expected to come in at annualized rates of 2.0%, 1.6%, 3.6%, and 4.3%, respectively, all similar to the initial readings. The preliminary reading of April’s durable goods orders is expected to rise 4.0% MOM versus the prior month’s 0.8%. Initial jobless claims for the week ending May 23 are forecasted to come in at 211,000, higher than the prior week’s 209,000, while continuing jobless claims for the week ending May 16 are projected to rise to 1.784 million from the prior week’s 1.782 million. April’s new home sales are expected to come in at an annualized pace of 660,000, down from the prior month’s 682,000. The Department of Energy’s measure of crude oil inventories for the week ending May 22 is projected to fall by 3.00 million barrels, compared to a 7.86-million-barrel decline during the previous week. April’s finalized reading of building permits is expected to remain unchanged from the initial reading of a 1.44 million annualized pace.

In the auction space, the U.S. Treasury is set to issue $85 billion in four-week bills, $80 billion in eight-week bills, and $44 billion in seven-year notes.

In the central bank space, Federal Reserve (Fed) Bank of Richmond President Tom Barkin, St. Louis Fed President Alberto Musalem, and New York Fed President John Williams are scheduled to speak today.

None at this time

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