Bond Market Commentary

Over in bond land, Treasury yields are unchanged before the opening bell Wednesday with markets digesting attacks between the U.S. and Iran and ahead of today’s release of May Consumer Price Index (CPI) and federal budget balance data. As of 6:56 AM ET, the yield on the 10-year note is unchanged at 4.52%, while the 30-year bond yield is also unchanged at 5.00%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 4.12%. 

Treasury yields were lower on Tuesday as the U.S. trade deficit for April came in slightly less than expectations following stronger-than-expected increases in both exports and imports and as March’s numbers were revised to show a smaller deficit than initially reported. Existing home sales experienced a larger-than-expected increase in May to an annualized pace of 4.17 million. The yield on the 10-year note was down four basis points (0.04%) to 4.52%, while the 30-year bond yield also fell four basis points (0.04%) to 5.00%. The yield on the two-year note decreased four basis points (0.04%) to 4.12%.

On the data front, the Mortgage Banker Association’s gauge of mortgage applications increased by 10.8% for the week ending June 5 versus the prior week’s decrease of 2.5%. The headline CPI for May is expected to show price increases of 0.5% month-over-month (MOM) and 4.2% year-over-year (YOY), versus the prior month’s increases of 0.6% and 3.8%, respectively. Meanwhile, core CPI is expected to show price increases of 0.3% MOM and 2.9% YOY, compared to the prior month’s increases of 0.4% and 2.8%, respectively. Data on May’s average hourly and weekly earnings is also scheduled for release. The Department of Energy’s measure of crude oil inventories is expected to have decreased by 2.20 million barrels for the week ending June 5 versus the prior week’s decrease of 7.97 million barrels. The U.S. federal budget balance for May is expected to show a deficit of $283.1 billion versus the prior month’s surplus of $215.0 billion.

In the auction space, the U.S. Treasury is set to issue $69 billion in 17-week bills and $39 billion in 10-year notes.

The Bloomberg 30-day visible supply rose $1.906 billion to $20.110 billion on Tuesday, above the 12-month average of $13.823 billion.

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