Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Monday as markets continue to assess developments in the Iran War and the U.S. led efforts to reopen the Strait of Hormuz. Investors are awaiting this week’s Federal Open Market Committee (FOMC) meeting ending March 18, along with today’s economic releases, including December industrial production and the Empire State Manufacturing Survey for March. As of 6:55 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 4.26%, while the 30-year bond yield is falling one basis point (0.01%) to 4.89%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 3.70%.

Treasury yields were mixed on Friday as the Personal Consumption Expenditures Deflator, the Federal Reserve’s (Fed’s) preferred gauge of inflation, came in mostly as expected in January, with the headline measure rising 0.3% month-over-month (MOM) and 2.8% year-over-year (YOY), while the core measure increased 0.4% MOM and 3.1% YOY. Personal income rose a less than expected 0.4% MOM, while personal spending posted a greater-than-expected increase of 0.4% MOM in January. The second reading of fourth-quarter gross domestic product was unexpectedly revised downward, with the economy growing at an annualized pace of 0.7%. Meanwhile, March’s preliminary consumer sentiment from the University of Michigan fell less than forecasted and the Job Openings and Labor Turnover Survey showed higher-than-projected job openings in January. The yield on the 10-year note was up two basis points (0.02%) to 4.28%, while the 30-year bond yield also rose two basis points (0.02%) to 4.90%. The yield on the two-year note decreased two basis points (0.02%) to 3.72%.

On the data front, the New York Fed will release March’s Empire State Manufacturing Survey, with the headline general business conditions index expected to come in at 3.9, down from the prior month’s 7.1. Industrial production is expected to have expanded by 0.1% MOM in February, compared to the prior month’s increase of 0.7%, while capacity utilization is forecasted to remain steady at 76.2%. The National Association of Home Builders’ Housing Market Index is forecasted to increase slightly to 37.0 in March from the prior reading of 36.0. 

In the auction space, the U.S. Treasury is set to issue $89 billion in 13-week bills and $77 billion in 26-week bills.

Mortgage rates were higher in the latest week. 

For the week ending March 12, the average 30-year fixed mortgage rate was up 11 basis points (0.11%) to 6.11%, versus 6.65% a year ago. The 15-year fixed mortgage rate increased seven basis points (0.07%) to 5.50%, versus 5.80% a year ago.

None at this time.

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