Bond Market Commentary

Over in bond land, Treasury yields are mostly higher before the opening bell Thursday ahead of today’s economic releases, including the third reading of first-quarter gross domestic product (GDP) and May’s personal income, personal spending, and Personal Consumption Expenditures (PCE) deflator (the Federal Reserve’s [Fed’s] preferred gauge of inflation) data. As of 6:57 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.41%, while the 30-year bond yield is also increasing two basis points (0.02%) to 4.86%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 4.15%.

Treasury yields were lower on Wednesday as new home sales unexpectedly declined to an annualized rate of 580,000 in May. Meanwhile, the U.S. current account deficit widened in the first quarter, coming in at $226.8 billion compared with the prior quarter’s upwardly revised deficit of $221.1 billion. The yield on the 10-year note was down 11 basis points (0.11%) to 4.39%, while the 30-year bond yield also fell 11 basis points (0.11%) to 4.84%. The yield on the two-year note decreased five basis points (0.05%) to 4.15%.

On the data front, personal income is expected to have increased 0.4% month-over-month (MOM) in May, versus the prior month’s little change, while personal spending is expected to have increased 0.6% MOM in May compared to the prior month’s 0.5% increase. The PCE deflator for May is expected to accelerate to 0.5% MOM and 4.1% year-over-year (YOY) from the prior month’s 0.4% and 3.8%, respectively. Meanwhile, the core PCE deflator for May is expected to have increased 0.3% MOM and 3.4% YOY compared to the prior month’s 0.2% and 3.3%, respectively. The third readings of first-quarter GDP, GDP Price Index, core Personal Consumption Expenditures Price Index, and personal consumption are expected to come in at annualized growth rates of 1.6%, 3.5%, 4.4% and 1.4%, respectively, all unchanged from the prior readings. Initial jobless claims for the week ending June 20 are expected to come in at 225,000, slightly lower than the prior week’s 226,000, while continuing claims for the week ending June 13 are forecasted to have been 1.802 million versus the prior week’s 1.810 million. The preliminary reading of May’s durable goods orders is forecasted to show a decrease of 5.0% MOM, compared to the prior month’s 8.0% increase. The Chicago Fed’s National Activity Index for May is expected to come in at 0.15, up from the prior month’s 0.14. The Kansas City Fed will release their Manufacturing Survey for June, with the composite index expected to come in at 6.0, down from the prior month’s 8.0.

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 $44 billion in seven-year notes.

In the central bank space, Fed Vice Chair for Supervision Michelle Bowman, Chicago Fed President Austan Goolsbee, and New York Fed President John Williams are scheduled to speak today.

The Bloomberg 30-day visible supply fell $2.781 billion to $13.489 billion on Wednesday, below the 12-month average of $13.860 billion.

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