Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Thursday ahead of today’s economic releases, including the advance reading of first-quarter gross domestic product (GDP) and March’s personal income, personal spending, and Personal Consumption Expenditures (PCE) Deflator (the Federal Reserve’s [Fed’s] preferred gauge of inflation). As of 6:52 AM ET, the yield on the 10-year note is decreasing three basis points (0.03%) to 4.40%, while the 30-year bond yield is falling one basis point (0.01%) to 4.99%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down five basis points (0.05%) to 3.90%. 

Treasury yields were higher on Wednesday as the Fed kept their policy rate range steady at 3.50%-3.75% in a divided decision and Jerome Powell announced he’d remain as a Fed Governor until “this investigation is well and truly over with transparency and finality.” The advance goods trade deficit widened slightly less than expected in March and the preliminary reading of durable goods orders registered a stronger-than-projected increase. Meanwhile, housing starts rose unexpectedly in March, increasing 10.8% month over month (MOM), following a 3.0% MOM decline in February, and the preliminary reading of March building permits largely reversed February’s strong gain. The yield on the 10-year note was up eight basis points (0.08%) to 4.43%, while the 30-year bond yield rose seven basis points (0.07%) to 5.00%. The yield on the two-year note increased 11 basis points (0.11%) to 3.95%.

On the data front, personal income is expected to have increased 0.3% MOM in March, versus the prior month’s decrease of 0.1%, while personal spending is expected to have increased 0.9% MOM compared to the prior month’s increase of 0.5%. The PCE deflator for March is expected to have risen 0.7% MOM and 3.5% year-over-year (YOY), versus the prior month’s 0.4% and 2.8%, respectively. Meanwhile, the core PCE deflator for March is expected to ease to 0.3% MOM from the prior month’s 0.4% but projected to accelerate to 3.2% YOY from the prior month’s 3.0%. Initial jobless claims for the week ending April 25 are expected to come in at 212,000, slightly lower than the prior week’s 214,000. Continuing claims are expected to fall to 1.815 million for the week ending April 18 from the prior week’s 1.821 million. The first-quarter Employment Cost Index is projected to increase 0.8% quarter-over-quarter compared to the prior quarter’s 0.7% rise. The advance reading of first-quarter GDP, the GDP Price Index, the core PCE Price Index, and personal consumption are expected to come in at annualized growth rates of 2.3%, 3.9%, 4.1%, and 1.4%, respectively, compared to the prior quarter’s annualized increases of 0.5%, 3.7%, 2.7%, and 1.9%, respectively. The Market News International Chicago purchasing managers’ index for April is expected to come in at 54.9, up from the prior month’s 52.8. The Leading Index for March is forecasted to show a decline of 0.2%.

In the auction space, the U.S. Treasury is set to issue $80 billion in four-week bills and $75 billion in eight-week bills.

The Bloomberg 30-day visible supply, at around $16.0 billion on Wednesday, remained above the 12-month average of approximately $14.0 billion.

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