Bond Market Commentary

Over in bond land, Treasury yields are mostly lower before the opening bell Friday ahead of today’s August jobs report. Investors are also looking ahead to next week’s inflation data, with the August Producer Price Index (PPI) and Consumer Price Index (CPI) reports scheduled for release on Thursday and Friday, respectively. As of 6:56 AM ET, the yield on the 10-year note is decreasing one basis point (0.01%) to 4.76%, while the 30-year bond yield is also falling one basis point (0.01%) to 5.24%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 4.34%. 

Treasury yields were lower on Thursday as comments by Federal Reserve (Fed) Governor Christopher Waller helped fuel optimism that the Fed could remain on hold. The U.S. trade deficit widened less than expected in July following an increase in imports and decrease in exports, both by more than projected. The Institute for Supply Management’s (ISM) August Services Purchasing Managers’ Index (PMI) rose to 55.4, exceeding expectations for an unchanged reading, while the prices paid component unexpectedly increased to 72.6. Both initial claims and continuing claims for the week prior increased. In other labor market data, the finalized reading of second-quarter nonfarm productivity growth remained unchanged at 1.4%, while unit labor costs were revised down to 1.2%, lower than expected. The yield on the 10-year note was down one basis point (0.01%) to 4.77%, while the 30-year bond yield also fell one basis point (0.01%) to 5.25%. The yield on the two-year note decreased three basis points (0.03%) to 4.34%. As of end of day Thursday (September 3), futures markets are pricing in 13 basis points (0.13%) worth of rate hikes at the Fed’s upcoming meeting, with a cumulative 33 basis points (0.33%) worth of rate hikes by year-end 2026 and a cumulative 64 basis points (0.64%) worth of rate hikes by year-end 2027.

On the data front, the August jobs report is expected to show nonfarm payrolls increasing by 55,000, following the prior month’s decline of 23,000, while manufacturing payrolls are projected to rise by 5,000, matching the previous month's gain. Average hourly earnings are forecast to increase 0.3% month-over-month and 3.1% year-over-year in August, compared to the prior month’s 0.1% and 3.2%, respectively. Meanwhile, the unemployment rate is expected to remain steady at 4.1%, while the labor force participation rate is projected to edge up to 61.5% from 61.4% in the prior month.

Mortgage rates were higher in the latest week. For the week ending September 3, the average 30-year fixed mortgage rate was up five basis points (0.05%) to 6.71%, versus 6.50% a year ago. The 15-year fixed mortgage rate increased six basis points (0.06%) to 6.04%, versus 5.60% a year ago.

The Bloomberg 30-day visible supply fell $3.439 billion to $23.392 billion on Thursday, above the 12-month average of $14.942 billion.

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