Bond Market Commentary

Over in bond land, Treasury yields are mostly higher before the opening bell Thursday ahead of today’s June jobs report, fresh unemployment claims data, and May’s factory orders. Following the holiday weekend, investors will be watching for next week’s release of June’s services purchasing managers’ indexes (PMIs) and the Federal Open Market Committee (FOMC) meeting minutes, scheduled for Monday and Wednesday, respectively. As of 7:02 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.49%, while the 30-year bond yield is also increasing one basis point (0.01%) to 4.98%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 4.17%.

Treasury yields were mostly higher on Wednesday following Federal Reserve (Fed) Chair Kevin Warsh’s comments at the European Central Bank’s Forum on Central Banking. The Automatic Data Processing National Employment Report for June showed private payrolls increasing by 98,000, below expectations. The Challenger Report showed job cuts declining 4.5% year-over-year (YOY) in June. Meanwhile, the Institute for Supply Management’s June manufacturing PMI and the prices paid component declined more than anticipated, coming in at 53.3 and 73.0, respectively. The yield on the 10-year note was up one basis point (0.01%) to 4.48%, while the 30-year bond yield rose two basis points (0.02%) to 4.97%. The yield on the two-year note was unchanged at 4.17%. As of end of day Wednesday (July 1), futures markets are pricing in seven basis points (0.07%) worth of rate hikes at the Federal Reserve's upcoming July meeting, with a cumulative 36 basis points (0.36%) worth of rate hikes by year-end 2026.

On the data front, June’s nonfarm payrolls are expected to expand by 113,000 versus the prior month’s 172,000, while manufacturing payrolls are projected to increase by 3,000 compared to the prior month’s 7,000. Average hourly earnings are projected to rise 0.3% month-over-month (MOM) and 3.5% YOY for June, compared to the prior month’s increases of 0.3% and 3.4%, respectively. Meanwhile, the unemployment rate and labor force participation rate for June are expected to remain unchanged at 4.3% and 61.8%, respectively. Initial jobless claims for the week ending June 27 are expected to come in at 218,000, higher than the prior week’s 215,000, while continuing claims are expected to come in at 1.820 million for the week ending June 20, down slightly from the prior week’s 1.821 million. May’s factory orders are expected to have decreased 2.0% MOM versus the prior month’s increase of 4.8%. Meanwhile, May’s finalized durable goods orders are expected to show a 4.5% MOM decrease, unchanged from the preliminary reading.

In the auction space, the U.S. Treasury is set to issue $85 billion in four-week bills and $85 billion in eight-week bills.

In the central bank space, San Francisco Fed President Mary Daly is scheduled to speak today.

The Bloomberg 30-day visible supply rose $1.168 billion to $13.729 billion on Wednesday, below the 12-month average of $13.933 billion.

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