Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Friday ahead of today’s preliminary December reading of consumer sentiment from the University of Michigan. September’s personal income, personal spending, and Personal Consumption Expenditures (PCE) deflator (the Federal Reserve’s [Fed’s] preferred gauge of inflation), and October’s consumer credit data, all delayed by the government shutdown, are also set for release. As of 6:54 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.11%, while the 30-year bond yield is increasing two basis points (0.02%) to 4.77%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up one basis point (0.01%) to 3.53%. 

Treasury yields were higher on Thursday as both initial and continuing jobless claims declined. Meanwhile, September’s factory orders edged up 0.2% month-over-month (MOM) and the Challenger report showed job cuts rose 23.5% year-over-year (YOY) in November. The yield on the 10-year note was up four basis points (0.04%) to 4.10%, while the 30-year bond yield rose two basis points (0.02%) to 4.75%. The yield on the two-year note increased four basis points (0.04%) to 3.52%. As of end of day Thursday (December 4), futures markets are pricing in 23 basis points (0.23%) worth of rate cuts at the Fed’s upcoming December meeting, with a cumulative 86 basis points (0.86%) worth of rate cuts by year-end 2026 and a cumulative 85 basis points (0.85%) worth of rate cuts by year-end 2027.

On the data front, personal income is expected to have increased 0.3% MOM in September, versus the prior month’s increase of 0.4%, while personal spending is expected to have increased 0.3% MOM in September compared to the prior month’s increase of 0.6%. The PCE deflator for September is expected to have increased 0.3% MOM, similar to the prior month, and to have risen to 2.8% YOY, accelerating from 2.7% in the prior month. Meanwhile, the core PCE deflator for September is expected to have increased 0.2% MOM, similar to the prior month, and decelerated to 2.8% YOY from the prior month’s 2.9%. The University of Michigan’s preliminary December reading of consumer sentiment is forecasted to come in at 52.0, higher than the prior month’s 51.0. The one-year and five- to ten-year inflation expectations for December from the University of Michigan are expected to come in at 4.5% and 3.4%, respectively, similar to the prior month’s readings. Consumer credit is expected to have expanded by $10.48 billion in October, lower than the prior month’s increase of $13.09 billion.

Mortgage rates were lower in the latest week. For the week ending December 4, the average 30-year fixed mortgage rate was down four basis points (0.04%) to 6.19%, versus 6.69% a year ago. The 15-year fixed mortgage rate decreased seven basis points (0.07%) to 5.44%, versus 5.96% a year ago.

The Bloomberg 30-day visible supply fell $4.657 billion to $15.073 billion on Thursday, above the 12-month average of $13.909 billion.

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