Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Monday as markets evaluated the latest developments in the Iran war and continued awaiting U.S. President Donald Trump’s response to the proposed ceasefire extension. Investors are also looking forward to today’s May manufacturing purchasing managers’ index (PMI) from the Institute for Supply Management (ISM), along with Wednesday’s services PMI and Friday’s May jobs report. As of 7:00 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.46%, while the 30-year bond yield is increasing one basis point (0.01%) to 4.98%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up three basis points (0.03%) to 4.03%. 

Treasury yields were mostly lower on Friday as the Market News International Chicago PMI for May rose more than expected to 62.7. The advance goods trade deficit for April unexpectedly narrowed following a downward revision to the prior month’s figure, while the preliminary estimate of April wholesale inventories rose 0.5% month-over-month (MOM), undershooting expectations. The yield on the 10-year note was down one basis point (0.01%) to 4.44%, while the 30-year bond yield was unchanged at 4.97%. The yield on the two-year note decreased two basis points (0.02%) to 4.00%.

On the data front, the finalized reading of S&P Global’s manufacturing PMI for May is expected to come in at 55.3, similar to the preliminary reading. The ISM manufacturing PMI and prices paid component for May are expected to come in at 53.0 and 85.0, respectively, versus the prior month’s readings of 52.7 and 84.6, respectively. April’s construction spending is expected to have increased 0.3% MOM, versus the prior month’s increase of 0.6%.

In the auction space, the U.S. Treasury is set to issue $89 billion in 13-week bills and $77 billion in 26-week bills.

Mortgage rates were higher in the latest week. For the week ending May 28, the average 30-year fixed mortgage rate was up two basis points (0.02%) to 6.53%, versus 6.89% a year ago. The 15-year fixed mortgage rate increased two basis points (0.02%) to 5.87%, versus 6.03% a year ago.

The Bloomberg 30-day visible supply fell $772 million to $19.094 billion on Friday, above the 12-month average of $13.933 billion.

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