Bond Market Commentary

Over in bond land, Treasury yields are mostly higher before the opening bell Wednesday ahead of today’s release of the Federal Reserve’s (Fed’s) minutes from the January 28 Federal Open Market Committee (FOMC) meeting. Investors will also be watching for January’s industrial production data, along with December’s durable goods orders and housing figures. As of 6:55 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.07%, while the 30-year bond yield is unchanged at 4.69%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up one basis point (0.01%) to 3.44%. 

Treasury yields were mostly higher on Tuesday as the New York Fed’s Empire State Manufacturing Survey headline general business conditions index showed a smaller-than-expected decline in February. Meanwhile, the National Association of Home Builders’ Housing Market Index unexpectedly declined in February. The yield on the 10-year note was up one basis point (0.01%) to 4.06%, while the 30-year bond yield was unchanged at 4.69%. The yield on the two-year note increased two basis points (0.02%) to 3.43%.

On the data front, the Mortgage Banker Association’s gauge of mortgage applications increased by 2.8% for the week ending February 13 versus the prior week’s decrease of 0.3%. The preliminary reading of December’s durable goods orders is forecasted to show a 2.0% month-over-month (MOM) decline, compared to the prior month’s 5.3% increase. Housing starts are expected to have been an annualized 1.30 million in December corresponding to a MOM increase of 1.1%. The preliminary reading of December building permits is expected to come in at an annualized 1.40 million corresponding to a MOM increase of 0.4%. Delayed data on November housing starts and building permits will also be released. The New York Fed will release their Business Leaders Survey for February, with the headline business activity index expected to improve to negative 14.2 from the prior month’s negative 16.1. Industrial production is forecasted to have increased 0.4% MOM in January, similar to the prior month’s increase, while capacity utilization is projected to have risen to 76.5% from the prior month’s 76.3%.

In the auction space, the U.S. Treasury is set to issue $69 billion in 17-week bills and $16 billion in 20-year bonds.

In the central bank space, Fed Vice Chair for Supervision Michelle Bowman is scheduled to speak today.

The Bloomberg 30-day visible supply rose $12 million to $10.602 billion on Tuesday, below the 12-month average of $13.871 billion.

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