Bond Market Commentary

Over in bond land, Treasury yields are mostly higher before the opening bell Thursday ahead of today’s release of the September jobs report. Investors will also be looking for fresh unemployment claims and October’s existing home sales data. As of 6:53 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.15%, while the 30-year bond yield is unchanged at 4.76%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up two basis points (0.02%) to 3.61%.

Treasury yields were higher on Wednesday as the Federal Open Market Committee’s October 28-29 minutes revealed many policymakers favor leaving rates steady in December, though some believed a cut “could well be appropriate in December if the economy evolved about as they expected.” The U.S. trade deficit for August narrowed more than expected, coming in at $59.6 billion. The yield on the 10-year note was up three basis points (0.03%) to 4.14%, while the 30-year bond yield also rose three basis points (0.03%) to 4.76%. The yield on the two-year note increased two basis points (0.02%) to 3.59%.

On the data front, initial jobless claims for the week ending November 15 are expected to come in at 227,000, while continuing claims are expected to come in at 1.95 million for the week ending November 8. September’s nonfarm payrolls are expected to expand by 51,000 versus the prior month’s 22,000, while manufacturing payrolls are projected to fall by 7,000 compared to the prior month’s decrease of 12,000. The unemployment rate and the labor force participation rate are expected to remain steady at 4.3% and 62.3%, respectively. Average hourly earnings are projected to rise 0.3% month-over-month (MOM) and 3.7% year-over-year (YOY) for September, both similar to the prior month’s increases. The Federal Reserve (Fed) Bank of Philadelphia will release their November Manufacturing Business Outlook Survey, with the diffusion index of current general activity forecasted to rise to 1.0 from the prior month’s negative 12.8. Existing home sales are forecasted to have been at an annualized 4.08 million pace in October versus the prior month’s 4.06 million pace, corresponding to an increase of 0.5% versus the prior month’s increase of 1.5%. The Kansas City Fed will release their manufacturing survey for November, with the Composite Index expected to come in at 3, down from the prior month’s 6.

In the auction space, the U.S. Treasury is set to issue $110 billion in four-week bills, $95 billion in eight-week bills, and $19 billion in 10-year Treasury Inflation-Protected Securities.

In the central bank space, Fed Governor Michael Barr, Fed Governor Lisa Cook, Fed Governor Stephen Miran, Chicago Fed President Austan Goolsbee, Cleveland Fed President Beth Hammack, and Philadelphia Fed President Anna Paulson are scheduled to speak today.

The Bloomberg 30-day visible supply fell $1.552 billion to $13.341 billion on Wednesday, below the 12-month average of $13.845 billion.

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