Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Thursday ahead of today’s releases on June retail sales and pending home sales, as well as weekly unemployment claims data. As of 7:00 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.57%, while the 30-year bond yield is increasing three basis points (0.03%) to 5.11%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up three basis points (0.03%) to 4.16%. 

Treasury yields were lower on Wednesday as the headline Producer Price Index (PPI) for June fell 0.3% month-over-month (MOM) against expectations of no change and registered a softer-than-expected increase of 5.5% year-over-year (YOY). The core PPI, which excludes volatile components like food and energy, also came in cooler than projected in June, rising 0.2% MOM and 4.7% YOY. The yield on the 10-year note was down four basis points (0.04%) to 4.55%, while the 30-year bond yield fell two basis points (0.02%) to 5.08%. The yield on the two-year note decreased six basis points (0.06%) to 4.13%.

On the data front, retail sales are expected to have risen 0.2% MOM in June versus the prior month’s increase of 0.9%, while retail sales excluding autos are forecasted to have decreased 0.1% MOM versus the prior month’s increase of 0.8%. Initial jobless claims for the week ending July 11 are expected to come in at 217,000, higher than the prior week’s 215,000, while continuing claims are expected to rise slightly to 1.818 million for the week ending July 4 from the prior week’s 1.814 million. The Federal Reserve (Fed) Bank of New York will release their Business Leaders Survey for July, while the Philadelphia Fed will release their July Manufacturing Business Outlook Survey, with the diffusion index of current general activity forecasted to increase to 12.5 from the prior month’s 10.3. The National Association of Home Builders’ (NAHB) Housing Market Index is expected to remain unchanged at 35 in July. Business inventories are expected to have risen 0.3% MOM in May, compared to the prior month’s increase of 0.5%. Pending home sales for June are expected to have decreased 0.5% MOM and increased 2.0% YOY, versus the prior month’s increases of 3.8% and 2.1%, respectively.

In the auction space, the U.S. Treasury is set to issue $110 billion in four-week bills and $100 billion in eight-week bills.

In the central bank space, Fed Vice Chair Philip Jefferson, Dallas Fed President Lorie Logan, and Kansas City Fed President Jeffrey Schmid are scheduled to speak today.

The Bloomberg 30-day visible supply rose $854 million to $22.244 billion on Wednesday, above the 12-month average of $14.049 billion.

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