Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Thursday as investors assess the latest strikes between the U.S. and Iran, with more possible if a deal is not reached in the near term. Market participants will also be looking forward to Producer Price Index (PPI) data for May and fresh unemployment claims data. As of 6:56 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 4.53%, while the 30-year bond yield is also falling two basis points (0.02%) to 5.01%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 4.12%.

Treasury yields were higher on Wednesday as the headline Consumer Price Index (CPI) came in as expected for May, with inflation rising 0.5% month-over-month (MOM) and 4.2% year-over-year (YOY). Meanwhile, the core measure showed softer-than-expected increase of 0.2% MOM, while accelerating to 2.9% YOY. The U.S. federal budget deficit came in higher than forecasted in May. The yield on the 10-year note was up three basis points (0.03%) to 4.55%, while the 30-year bond yield also rose three basis points (0.03%) to 5.03%. The yield on the two-year note increased two basis points (0.02%) to 4.14%.

On the data front, initial jobless claims for the week ending June 6 are expected to come in at 220,000, lower than the prior week’s 225,000, while continuing claims are expected to come in at 1.79 million for the week ending May 30, up from the prior week’s 1.78 million. The headline PPI for May is expected to show price increases of 0.7% MOM and 6.4% YOY versus the prior month’s increases of 1.4% and 6.0%, respectively. The core PPI is expected to show price increases of 0.5% MOM and 5.4% YOY versus the prior month’s increases of 1.0% and 5.2%, respectively. The Federal Reserve’s measure of the household change in net worth for the first quarter is scheduled for release.

In the auction space, the U.S. Treasury is set to issue $70 billion in four-week bills, $75 billion in eight-week bills, and $22 billion in 30-year bonds.

The Bloomberg 30-day visible supply fell $2.346 billion to $17.764 billion on Wednesday, above the 12-month average of $13.815 billion.

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