Bond Market Commentary

Over in bond land, Treasury yields are mostly unchanged before the opening bell Friday as investors are focused on today’s key economic releases, with attention on the second-quarter Employment Cost Index and the finalized July reading of the University of Michigan consumer sentiment survey. As of 7:04 AM ET, the yield on the 10-year note is unchanged at 4.67%, while the 30-year bond yield is also unchanged at 5.21%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up one basis point (0.01%) to 4.26%.

Treasury yields were mixed on Thursday as the core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s (Fed’s) preferred gauge of inflation, rose 0.1% month-over-month (MOM) and 3.3% year-over-year in June. Personal income and spending rose 0.2% and 0.3% MOM, respectively, below consensus estimates. Additionally, the advance estimate of second-quarter gross domestic product growth came in at a weaker-than-expected 1.5% annualized pace, although personal consumption increased a stronger-than-expected 3.2%. Meanwhile, initial jobless claims increased, though continuing claims for the week prior fell. The yield on the 10-year note was down one basis point (0.01%) to 4.67%, while the 30-year bond yield rose one basis point (0.01%) to 5.21%. The yield on the two-year note decreased two basis points (0.02%) to 4.25%. As of end of day Thursday (July 30), futures markets are pricing in 17 basis points (0.17%) worth of rate hikes at the Fed’s upcoming September meeting, with a cumulative 33 basis points (0.33%) worth of rate hikes by year-end 2026.

On the data front, the second-quarter Employment Cost Index is expected to increase 0.8% quarter-over-quarter, compared with the prior quarter’s 0.9% rise. Meanwhile, the Market News International Chicago purchasing managers' index for July is projected to come in at 56.0, down slightly from the prior month’s reading of 56.7. The finalized July reading of consumer sentiment from the University of Michigan is expected to come in at 54.0 versus the initial reading of 54.4, while one-year and 5-10-year inflation expectations are projected to come in at 4.3% and 3.3%, compared to the preliminary readings of 4.2% and 3.3%, respectively.

Mortgage rates were higher in the latest week. For the week ending July 30, the average 30-year fixed mortgage rate was up eight basis points (0.08%) to 6.66%, versus 6.72% a year ago. The 15-year fixed mortgage rate increased eight basis points (0.08%) to 6.04%, versus 5.85% a year ago.

The Bloomberg 30-day visible supply fell $1.192 billion to $22.047 billion on Thursday, above the 12-month average of $14.071 billion.

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