Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Tuesday as investors are awaiting today’s Consumer Price Index (CPI) and Federal budget balance data for April. Meanwhile, a reading of small business optimism increased less than expected. As of 6:54 AM ET, the yield on the 10-year note is rising two basis points (0.02%) to 4.43%, while the 30-year bond yield is increasing one basis point (0.01%) to 5.00%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up two basis points (0.02%) to 3.97%. 

Treasury yields were higher on Monday following President Donald Trump’s decision not to accept Tehran’s counterproposal to his peace plan, with President Trump also commenting on the fragility of the ceasefire. Meanwhile, existing home sales in April rose slightly to an annualized 4.02 million, undershooting expectations and barely above March’s revised 4.01 million pace. The yield on the 10-year note was up six basis points (0.06%) to 4.41%, while the 30-year bond yield also rose six basis points (0.06%) to 4.99%. The yield on the two-year note increased seven basis points (0.07%) to 3.95%.

On the data front, the National Federation of Independent Business’s Small Business Optimism Index increased to 95.9 in April from the prior month’s 95.8. The headline CPI for April is expected to show price increases of 0.6% month-over-month (MOM) and 3.7% year-over-year (YOY) versus the prior month’s increases of 0.9% and 3.3%, respectively. Meanwhile, core CPI is expected to show price increases of 0.3% MOM and 2.7% YOY, versus the prior month’s increases of 0.2% and 2.6%, respectively. April data on average hourly and weekly earnings is also scheduled for release, as is the Federal Reserve (Fed) Bank of New York's first-quarter Report on Household Debt and Credit. The U.S. federal budget balance for April is expected to show a surplus of $220.0 billion versus the prior month’s deficit of $164.1 billion.

In the auction space, the U.S. Treasury is set to issue $80 billion in six-week bills, $50 billion in 52-week bills, and $42 billion in 10-year notes.

In the central bank space, Chicago Fed President Austan Goolsbee and New York Fed President John Williams are scheduled to speak today.

None at this time.

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