Bond Market Commentary

Over in bond land, Treasury yields are mostly unchanged before the opening bell Tuesday as investors are awaiting today’s Producer Price Index (PPI) data release for March. Meanwhile, a reading of small business optimism declined more-than-expected. Investors are also monitoring diplomatic moves to revive U.S.–Iran talks alongside developments on the U.S. blockade of the Strait of Hormuz. As of 6:56 AM ET, the yield on the 10-year note is unchanged at 4.29%, while the 30-year bond yield is falling one basis point (0.01%) to 4.89%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 3.77%.

Treasury yields were lower on Monday as existing home sales experienced a larger-than-expected decline in March to an annualized pace of 3.98 million. The yield on the 10-year note was down three basis points (0.03%) to 4.29%, while the 30-year bond yield fell one basis point (0.01%) to 4.90%. The yield on the two-year note decreased three basis points (0.03%) to 3.77%.

On the data front, the National Federation of Independent Business’s gauge of small business optimism decreased to 95.8 in March from the prior month’s 98.8. The headline PPI for March is expected to show price increases of 1.1% month-over-month (MOM) and 4.6% year-over-year (YOY) versus the prior month’s increases of 0.7% and 3.4%, respectively. The core PPI, which excludes volatile components like food and energy, is expected to show price increases of 0.4% MOM and 4.1% YOY versus the prior month’s increase of 0.5% and 3.9%, respectively.

In the auction space, the U.S. Treasury is set to issue $50 billion in 52-week bills and $70 billion in six-week bills.

In the central bank space, Federal Reserve (Fed) Governor Michael Barr, Richmond Fed President Tom Barkin, Boston Fed President Susan Collins, Chicago Fed President Austan Goolsbee, and Philadelphia Fed President Anna Paulson are scheduled to speak today.

The Bloomberg 30-day visible supply rose $6.493 billion to $20.055 billion on Monday, above the 12-month average of $14.086 billion.

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