Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Thursday ahead of today’s weekly unemployment claims data, February’s Leading Index, and January’s new home sales data. Investors are also continuing to assess development in the Iran War, including attacks on energy facilities. As of 6:57 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.28%, while the 30-year bond yield is also increasing one basis point (0.01%) to 4.89%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up four basis points (0.04%) to 3.81%. 

Treasury yields were higher on Wednesday as the Federal Open Market Committee (FOMC) voted 11–1 to keep the federal funds target range unchanged at 3.5%–3.75%. In his post-meeting press conference, Federal Reserve (Fed) Chair Jerome Powell noted that policymakers still expect inflation to ease, though not as quickly as previously hoped. The updated Summary of Economic Projections showed the Fed continues to expect one rate cut this year. Meanwhile, the February Producer Price Index (PPI) came in hotter than expected, with headline and core prices increasing 0.7% and 0.5% month over month (MOM), respectively, and the year over year rates accelerating to 3.4% and 3.9%, respectively. The yield on the 10-year note was up seven basis points (0.07%) to 4.27%, while the 30-year bond yield rose four basis points (0.04%) to 4.88%. The yield on the two-year note increased 10 basis points (0.10%) to 3.77%.

On the data front, initial jobless claims for the week ending March 14 are expected to come in at 215,000, higher than the prior week’s 213,000, while continuing claims are expected to rise slightly to 1.852 million for the week ending March 7 from the prior week’s 1.850 million. The Philadelphia Fed will release their March Manufacturing Business Outlook Survey, with the diffusion index of current general activity forecasted to fall to 8.0 from the prior month’s 16.3. The Leading Index for February is forecasted to show a decline of 0.1%, versus the prior month’s decrease of 0.2%. Meanwhile, new home sales are projected to have been at an annualized 722,000 pace in January versus the prior month’s 745,000 pace, corresponding to a 2.7% MOM decrease versus the prior month’s decrease of 1.7%. The finalized January reading of wholesale inventories is expected to show an increase of 0.2% MOM, similar to the preliminary reading. The Fed’s measure of the household change in net worth for the fourth quarter is scheduled for release. The finalized reading for January building permits is anticipated to be revised higher to an annualized 1.380 million, compared to the preliminary estimate of 1.376 million.

In the auction space, the U.S. Treasury is set to issue $90 billion in four-week bills, $85 billion in eight-week bills, and $19 billion in 10-year Treasury Inflation-Protected Securities.

The Bloomberg 30-day visible supply fell $2.121 billion to $14.559 billion on Wednesday, above the 12-month average of $14.032 billion.

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