Bond Market Commentary

Over in bond land, Treasury yields are mostly higher before the opening bell Friday as the U.S.-Iran conflict continues, with U.S. officials indicating that the blockade of Iranian ports is not expected to be lifted anytime soon. Investors will also be looking for the preliminary August reading of consumer sentiment from the University of Michigan and July’s retail sales data. As of 6:58 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.65%, while the 30-year bond yield is increasing two basis points (0.02%) to 5.23%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 4.14%. 

Treasury yields were lower on Thursday as July Producer Price Index (PPI) was softer than anticipated on a headline basis, with prices unchanged month-over-month (MOM) and easing to 4.7% year-over-year (YOY). Meanwhile, core PPI rose by a smaller-than-expected 0.2% MOM, while decelerating to 4.2% YOY. Initial jobless claims increased, while continuing claims for the prior week fell. The yield on the 10-year note was down five basis points (0.05%) to 4.64%, while the 30-year bond yield also fell five basis points (0.05%) to 5.21%. The yield on the two-year note decreased six basis points (0.06%) to 4.14%. As of end of day Thursday (August 13), futures markets are pricing in nine basis points (0.09%) worth of rate hikes at the Federal Reserve's upcoming September meeting, with a cumulative 23 basis points (0.23%) worth of rate hikes by year-end 2026 and a cumulative 43 basis points (0.43%) worth of rate hikes by year-end 2027.

On the data front, retail sales are expected to have risen 0.1% MOM in July versus the prior month’s increase of 0.2%, while retail sales excluding autos are forecasted to have risen 0.2% MOM versus the prior month’s decrease of 0.2%. The University of Michigan’s preliminary August reading of consumer sentiment is forecasted to come in at 55.0, lower than the prior month’s 55.2. The one-year and five- to ten-year inflation expectations for August from the University of Michigan are expected to come in at 4.2% and 3.3%, respectively, similar to the prior month’s readings. Business inventories are expected to have risen 0.1% MOM in June, compared to the prior month’s increase of 0.3%.

Mortgage rates were lower in the latest week. For the week ending August 13, the average 30-year fixed mortgage rate was down two basis points (0.02%) to 6.67%, versus 6.58% a year ago. The 15-year fixed mortgage rate decreased five basis points (0.05%) to 5.96%, versus 5.71% a year ago.

The Bloomberg 30-day visible supply fell $2.929 billion to $18.469 billion on Thursday, above the 12-month average of $14.273 billion.

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