Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Friday ahead of today’s release of January purchasing managers’ indexes (PMIs) from S&P Global and finalized consumer sentiment data from the University of Michigan. As of 6:57 AM ET, the yield on the 10-year note is decreasing one basis point (0.01%) to 4.23%, while the 30-year bond yield is falling two basis points (0.02%) to 4.82%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down one basis point (0.01%) to 3.60%.

Treasury yields were mixed on Thursday as the Personal Consumption Expenditures Deflator, the Federal Reserve (Fed’s) preferred gauge of inflation, rose 0.2% month-over-month (MOM) and 2.8% year-over-year (YOY) in November for both the headline and core measures. November’s personal income increased 0.3% MOM, while personal spending rose 0.5% MOM. Meanwhile, the third reading of third-quarter gross domestic product was revised higher to an annualized 4.4% quarter-over-quarter. Initial jobless claims ticked up, though continuing claims eased. The yield on the 10-year note was unchanged at 4.24%, while the 30-year bond yield fell two basis points (0.02%) to 4.84%. The yield on the two-year note increased three basis points (0.03%) to 3.61%. As of end of day Thursday (January 22), futures markets are pricing in one basis point (0.01%) worth of rate cuts at the Fed’s upcoming meeting ending next Wednesday (January 28), with a cumulative 44 basis points (0.44%) worth of rate cuts by year-end 2026 and a cumulative 41 basis points (0.41%) worth of rate cuts by year-end 2027.

On the data front, the preliminary reading of S&P Global’s composite PMI for January is expected to come in at 53.0 versus the prior month’s 52.7, with the manufacturing and services PMIs forecasted at 52.0 and 52.9, respectively, compared to the prior month’s 51.8 and 52.5, respectively. The Leading Index for November is forecasted to show a decline of 0.2%. The finalized January reading of consumer sentiment from the University of Michigan is expected to come in at 54.0, while one-year and 5-10-year inflation expectations are projected to come in at 4.2% and 3.4%, all unchanged from the initial readings. The Kansas City Fed will release their Services Survey for January, with the composite index expected to come in at 3.0, similar to the prior month’s reading.

Mortgage rates were higher in the latest week. For the week ending January 22, the average 30-year fixed mortgage rate was up three basis points (0.03%) to 6.09%, versus 6.96% a year ago. The 15-year fixed mortgage rate increased six basis points (0.06%) to 5.44%, versus 6.16% a year ago.

The Bloomberg 30-day visible supply fell $3.639 billion to $11.101 billion on Thursday, below the 12-month average of $13.905 billion.

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