Bond Market Commentary

Over in bond land, Treasury yields are unchanged before the opening bell Thursday as investors are looking forward to today’s economic releases, including July’s trade deficit, the Institute for Supply Management’s (ISM) August Services Purchasing Managers’ Index (PMI), and labor market data. As of 6:55 AM ET, the yield on the 10-year note is unchanged at 4.78%, while the 30-year bond yield is also unchanged at 5.26%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 4.37%.

Treasury yields were lower on Wednesday as markets evaluated developments in the war between the U.S. and Iran. The Automatic Data Processing National Employment Report for August showed private payrolls increasing by 38,000, below expectations. Meanwhile, July’s factory orders showed a stronger-than-expected increase of 0.9% month-over-month (MOM), while finalized durable goods orders came in unchanged from the preliminary reading of 1.1% MOM. The yield on the 10-year note was down two basis points (0.02%) to 4.78%, while the 30-year bond yield fell one basis point (0.01%) to 5.26%. The yield on the two-year note decreased three basis points (0.03%) to 4.37%.

On the data front, the Challenger Report on job cuts for August showed a 38.5% year-over-year decline, compared with the prior month's 46.1% decrease. The U.S. trade deficit is expected to widen in July to $90.2 billion from the prior month’s $73.3 billion. July’s imports are forecasted to increase 1.8% MOM following the prior month's 1.8% decrease, while exports are expected to decline 1.0% MOM after falling 0.9% in the previous month. Initial jobless claims for the week ending August 29 are expected to rise to 205,000 from the prior week’s 203,000, while continuing claims for the week ending August 22 are projected to come in at 1.784 million, up from the prior week’s 1.778 million. The finalized readings of second-quarter nonfarm productivity growth and unit labor costs are expected to increase 1.4% quarter-over-quarter and at an annualized pace of 1.3%, respectively, both unchanged from the preliminary readings. S&P Global’s finalized services and composite PMIs for August are expected to come in at 56.8 and 56.1, respectively, versus the preliminary readings of 56.8 and 56.0, respectively. The ISM’s August Services PMI is expected to come in at 54.1, unchanged from the previous month’s reading, while the prices paid component is expected to register 70.0, versus the prior month’s 70.3.

In the auction space, the U.S. Treasury is set to issue $90 billion in four-week bills and $85 billion in eight-week bills.

In the central bank space, Federal Reserve (Fed) Governor Christopher Waller, Chicago Fed President Austan Goolsbee, and Cleveland Fed President Beth Hammack are scheduled to speak today.

The Bloomberg 30-day visible supply rose $1.121 billion to $26.831 billion on Wednesday, above the 12-month average of $14.900 billion.

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