Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Tuesday ahead of today’s May trade deficit data. Looking ahead, investors will closely monitor the release of the Federal Open Market Committee meeting minutes tomorrow and June existing home sales data on Thursday for further clues about the economic outlook and the future path of monetary policy. As of 6:59 AM ET, the yield on the 10-year note is rising three basis points (0.03%) to 4.50%, while the 30-year bond yield is increasing two basis points (0.02%) to 5.00%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up three basis points (0.03%) to 4.14%. 

Treasury yields were lower on Monday as the Institute for Supply Management’s services Purchasing Managers’ Index (PMI) declined as expected to 54.0 in June, while the prices paid component eased to 67.7, falling slightly less than anticipated. Meanwhile, S&P Global’s finalized June services and composite PMIs were both revised modestly downward, coming in at 51.2 and 51.9, respectively. The yield on the 10-year note was down one basis point (0.01%) to 4.47%, while the 30-year bond yield also fell one basis point (0.01%) to 4.98%. The yield on the two-year note decreased three basis points (0.03%) to 4.11%.

On the data front, the U.S. trade deficit is expected to expand in May to $78.4 billion from the prior month’s $55.9 billion, with exports and imports projected to show a decrease of 3.5% and an increase of 2.1% month-over-month (MOM), respectively, versus the prior month’s increases of 2.6% and 2.0% MOM, respectively. The Federal Reserve (Fed) Bank of New York will release their June Survey of Consumer Expectations, including a measure of inflation expectations.

In the auction space, the U.S. Treasury is set to issue $90 billion in six-week bills, $52 billion in 52-week bills, and $58 billion in three-year notes.

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

The Bloomberg 30-day visible supply fell $155 million to $16.044 billion on Monday, above the 12-month average of $13.977 billion.

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