Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Thursday as investors continue to assess developments in the conflict in the Middle East and ahead of today’s economic releases, including data on unemployment claims, import prices, and the preliminary fourth-quarter nonfarm productivity growth and unit labor costs. As of 6:56 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.12%, while the 30-year bond yield is also increasing two basis points (0.02%) to 4.75%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up two basis points (0.02%) to 3.57%.

Treasury yields were higher on Wednesday as the ADP Employment Change Report showed private nonfarm payroll gains for February coming in higher than anticipated. The Institute for Supply Management’s services purchasing managers’ index (PMI) for February increased to 56.1, defying expectations of a decline, while the prices paid component registered an unexpected drop. Meanwhile, S&P Global’s finalized services and composite PMIs for February were both revised slightly downward to 51.7 and 51.9, respectively. The yield on the 10-year note was up four basis points (0.04%) to 4.10%, while the 30-year bond yield rose three basis points (0.03%) to 4.73%. The yield on the two-year note increased four basis points (0.04%) to 3.55%.

On the data front, the Challenger Report on job cuts for February will be released today. The January Import Price Index is projected to have increased 0.3% month-over-month (MOM) and 0.1% year-over-year (YOY), versus the prior month’s 0.1% and little change, respectively. Meanwhile, the Export Price Index is forecasted to have increased 0.2% MOM, easing from the prior month’s 0.3%. The preliminary reading of fourth-quarter nonfarm productivity is expected to show an increase of 1.9% quarter-over-quarter, versus the prior quarter’s increase of 4.9%, while unit labor costs are forecasted to have increased at an annualized 2.0% pace, following a 1.9% decline in the prior quarter. Initial jobless claims for the week ending February 28 are expected to come in at 215,000, higher than the prior week’s 212,000, while continuing claims are expected to come in at 1.85 million for the week ending February 21, slightly up from the prior week’s 1.83 million.

In the auction space, the U.S. Treasury is set to issue $105 billion in four-week bills and $95 billion in eight-week bills.

In the central bank space, Federal Reserve (Fed) Vice Chair for Supervision Michelle Bowman and Chicago Fed President Austan Goolsbee are scheduled to speak today.

The Bloomberg 30-day visible supply fell $1.701 billion to $16.814 billion on Wednesday, above the 12-month average of $13.981 billion.

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