Bond Market Commentary

Over in bond land, Treasury yields are mostly higher before the opening bell Wednesday ahead of today’s personal income, personal spending, and Personal Consumption Expenditures (PCE) deflator (the Federal Reserve’s [Fed’s] preferred gauge of inflation) data for July, along with the second reading of second-quarter gross domestic product (GDP). Additionally, markets continue to evaluate U.S.-Canadian tariff developments. As of 7:01 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.64%, while the 30-year bond yield is unchanged at 5.17%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up three basis points (0.03%) to 4.20%. 

Treasury yields were lower on Tuesday as August consumer confidence came in lower than expected, declining to 89.4. Separately, measures of U.S. home price growth were mixed in June, while July’s new home sales declined more than expected to an annualized rate of 607,000. The yield on the 10-year note was down seven basis points (0.07%) to 4.63%, while the 30-year bond yield fell five basis points (0.05%) to 5.17%. The yield on the two-year note decreased six basis points (0.06%) to 4.17%.

On the data front, the Mortgage Banker Association’s gauge of mortgage applications decreased by 1.0% for the week ending August 21 versus the prior week’s decrease of 0.4%. Personal income and personal spending for July are expected to have increased 0.2% and 0.1% month-over-month (MOM), respectively, compared to the prior month’s gains of 0.2% and 0.3%, respectively. Meanwhile, July’s PCE Price Index is expected to have increased 0.1% MOM and 3.6% year-over-year (YOY), compared to the prior month’s decline of 0.1% MOM and increase of 3.7% YOY, respectively. The core PCE Price Index is projected to have risen 0.2% MOM and 3.3% YOY, versus the prior month’s 0.1% MOM and 3.3% YOY. Separately, preliminary July durable goods orders are expected to have increased 0.5% MOM, matching the prior month’s gain. Meanwhile, the second estimate of second-quarter GDP, personal consumption, the GDP Price Index, and the core PCE Price Index are expected to remain unchanged at annualized growth rates of 1.5%, 3.2%, 6.2%, and 3.4%, respectively. The Department of Energy’s measure of crude oil inventories is expected to have increased by 1.58 million barrels for the week ending August 21 versus the prior week’s increase of 4.40 million barrels.

In the auction space, the U.S. Treasury is set to issue $72 billion in 17-week bills, $28 billion in two-year floating rate notes, and $70 billion in five-year notes.

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