Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Friday following a rise in oil prices and inflationary concerns. Investors are also looking forward to today’s economic releases, including April’s industrial production and May’s Empire State Manufacturing Survey. As of 6:54 AM ET, the yield on the 10-year note is rising five basis points (0.05%) to 4.53%, while the 30-year bond yield is increasing six basis points (0.06%) to 5.09%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up two basis points (0.02%) to 4.04%. 

Treasury yields were mostly higher on Thursday as retail sales for April increased 0.5% month-over-month (MOM). Import prices posted a stronger than anticipated increase in April, rising 1.9% MOM and 4.2% year-over-year (YOY), while export prices also increased more than expected, climbing 3.3% MOM and 8.8% YOY. Initial claims for unemployment rose more than expected, alongside a higher-than-expected increase in continuing claims for the prior week. The yield on the 10-year note was up one basis point (0.01%) to 4.48%, while the 30-year bond yield was unchanged at 5.03%. The yield on the two-year note increased four basis points (0.04%) to 4.02%. As of end of day Thursday (May 14), futures markets are pricing in one basis point (0.01%) worth of rate cuts at the Federal Reserve's upcoming June meeting, with a cumulative 13 basis points (0.13%) worth of rate hikes by year-end 2026.

On the data front, the Federal Reserve (Fed) Bank of New York will release their Empire State Manufacturing Survey for May, with the headline general business conditions index expected to fall to 7.2 from the prior month’s 11.0. Industrial production is forecasted to have grown 0.3% MOM in April versus the prior month’s 0.5% decline, while capacity utilization is projected to have risen to 75.8% from the prior month’s 75.7%.

Mortgage rates were lower in the latest week. For the week ending May 14, the average 30-year fixed mortgage rate was down one basis point (0.01%) to 6.36%, versus 6.81% a year ago. The 15-year fixed mortgage rate decreased one basis point (0.01%) to 5.71%, versus 5.92% a year ago.

The Bloomberg 30-day visible supply fell $2.331 billion to $12.074 billion on Thursday, below the 12-month average of $13.957 billion.

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