Bond Market Commentary

Over in bond land, Treasury yields are mostly higher before the opening bell Wednesday ahead of today’s Federal Open Market Committee (FOMC) meeting, with futures markets widely expecting the Federal Reserve (Fed) to cut its policy rate by 25 basis points (0.25%). As of 6:55 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.20%, while the 30-year bond yield is unchanged at 4.81%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up one basis point (0.01%) to 3.62%.

Treasury yields were higher on Tuesday as job openings unexpectedly rose more than forecasted in September and October. Meanwhile, small business optimism increased in November, and the leading index declined in September. The yield on the 10-year note was up three basis points (0.03%) to 4.19%, while the 30-year bond yield rose one basis point (0.01%) to 4.81%. The yield on the two-year note increased three basis points (0.03%) to 3.61%.

On the data front, the Mortgage Banker Association’s gauge of mortgage applications increased by 4.8% for the week ending December 5 versus the prior week’s decrease of 1.4%. The U.S. deficit for November is expected to narrow to $195.0 billion from the prior month’s $366.8 billion. The third-quarter Employment Cost Index is projected to rise 0.9% quarter-over-quarter, similar to the prior quarter. Meanwhile, the Department of Energy’s measure of crude oil inventories is expected to have decreased by 1.3 million barrels for the week ending December 5 versus the prior week’s increase of 574,000 barrels.

In the auction space, the U.S. Treasury is set to issue $69 billion in 17-week bills.

The Bloomberg 30-day visible supply rose $2.225 billion to $13.243 billion on Tuesday, below the 12-month average of $13.899 billion.

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