Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Friday ahead of today’s key releases, including February’s jobs report, along with January’s retail sales and consumer credit data. Investors are also looking forward to a slew of Federal Reserve (Fed) speakers today, as well as continuing to assess development in the conflict in the Middle East. As of 6:55 AM ET, the yield on the 10-year note is rising three basis points (0.03%) to 4.17%, while the 30-year bond yield is also increasing three basis points (0.03%) to 4.78%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up four basis points (0.04%) to 3.62%. 

Treasury yields were higher on Thursday as the February Challenger Report showed a steep decline in job cuts, easing some of the pressure seen in January. Meanwhile, import prices posted a smaller than expected increase of 0.2% month-over-month (MOM) in January, whereas export prices registered a stronger than expected gain of 0.6% MOM. The preliminary fourth quarter nonfarm productivity growth and unit labor costs both increased more than expected. Initial jobless claims came in lower than expected, while continuing claims for the week prior ticked up. The yield on the 10-year note was up four basis points (0.04%) to 4.14%, while the 30-year bond yield rose two basis points (0.02%) to 4.75%. The yield on the two-year note increased three basis points (0.03%) to 3.58%. As of end of day Thursday (March 5), futures markets are pricing in one basis point (0.01%) worth of rate cuts at the Federal Reserve's upcoming March meeting, with a cumulative 40 basis points (0.40%) worth of rate cuts by year-end 2026 and a cumulative 62 basis points (0.62%) worth of rate cuts by year-end 2027.

On the data front, retail sales are projected to decrease 0.3% month-over-month (MOM) in January, following little change in the prior month, while retail sales excluding autos are expected to flatline in January, similar to the previous month. February’s nonfarm payrolls are expected to expand by 55,000 versus the prior month’s 130,000, while manufacturing payrolls are projected to fall by 2,000 compared to the prior month’s increase of 5,000. The unemployment rate and the labor force participation rate are expected to remain steady at 4.3% and 62.5%, respectively. Average hourly earnings are projected to rise 0.3% MOM and 3.7% year-over-year for February, compared to the prior month’s increases of 0.4% and 3.7%, respectively. Business inventories are expected to have increased by 0.1% MOM in December, similar to the prior month’s increase. Consumer credit is expected to have expanded by $12.65 billion in January, less than the prior month’s increase of $24.05 billion.

In the central bank space, Fed Governor Stephen Miran, Fed Governor Christopher Waller, Boston Fed President Susan Collins, San Francisco Fed President Mary Daly, Chicago Fed President Austan Goolsbee, Cleveland Fed President Beth Hammack, Philadelphia Fed President Anna Paulson, and Kansas City Fed President Jeffrey Schmid are scheduled to speak today.

Mortgage rates were mixed in the latest week. For the week ending March 5, the average 30-year fixed mortgage rate was up two basis points (0.02%) to 6.00%, versus 6.63% a year ago. The 15-year fixed mortgage rate decreased one basis point (0.01%) to 5.43%, versus 5.79% a year ago.

The Bloomberg 30-day visible supply fell $1.852 billion to $14.962 billion on Thursday, above the 12-month average of $13.973 billion.

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