Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Friday following additional military strikes by the U.S. and Iran overnight. Investors are looking forward to today’s economic releases, including June import prices and industrial production, as well as the University of Michigan’s preliminary July consumer sentiment reading. As of 7:01 AM ET, the yield on the 10-year note is decreasing three basis points (0.03%) to 4.52%, while the 30-year bond yield is also falling three basis points (0.03%) to 5.05%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 4.12%. 

Treasury yields were mostly unchanged on Thursday as June retail sales increased 0.2% month-over-month (MOM), in line with expectations. Meanwhile, pending home sales in June declined a sharper-than-expected 5.4% MOM, while July homebuilder sentiment came in below projections. Both initial jobless claims and continuing claims for the week prior edged lower. The yield on the 10-year note was unchanged at 4.55%, while the 30-year bond yield was also unchanged at 5.08%. The yield on the two-year note increased one basis point (0.01%) to 4.14%. As of end of day Thursday (July 16), futures markets are pricing in three basis points (0.03%) worth of rate hikes at the Federal Reserve's (Fed’s) upcoming July meeting, with a cumulative 27 basis points (0.27%) worth of rate hikes by year-end 2026.

On the data front, import prices are expected to decrease by 0.7% MOM and increase 6.5% year-over-year (YOY) in June, versus the prior month’s increases of 1.9% and 6.7%, respectively. Meanwhile, export prices are expected to decrease by 0.7% MOM and increase by 10.2% YOY in June, versus the prior month’s increases of 1.3% and 11.2%, respectively. Housing starts are expected to have been an annualized 1.31 million in June versus the prior month’s 1.18 million. The preliminary reading of June building permits is expected to come in at an annualized 1.40 million versus the prior month’s 1.41 million. Industrial production is forecasted to have increased 0.2% MOM in June, compared to the prior month’s increase of 0.1%, while capacity utilization is projected to remain steady at 76.2%. The University of Michigan’s preliminary July reading of consumer sentiment is forecasted to come in at 51.0, higher than the prior month’s 49.5. The one- and 5-10-year inflation expectations for July from the University of Michigan are expected to come in at 4.4% and 3.3%, respectively, compared to the prior month’s 4.6% and 3.3%, respectively.

Mortgage rates were higher in the latest week. For the week ending July 16, the average 30-year fixed mortgage rate was up six basis points (0.06%) to 6.55%, versus 6.75% a year ago. The 15-year fixed mortgage rate increased 11 basis points (0.11%) to 5.93%, versus 5.92% a year ago.

The Bloomberg 30-day visible supply fell $6.201 billion to $16.043 billion on Thursday, above the 12-month average of $14.049 billion.

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