Bond Market Commentary

Over in bond land, Treasury yields are unchanged before the opening bell Wednesday as investors are awaiting today’s economic releases, including unemployment claims, the Federal Reserve’s (Fed’s) Beige Book survey of regional economic conditions, and September’s preliminary durable goods orders data. As of 6:55 AM ET, the yield on the 10-year note is unchanged at 4.00%, while the 30-year bond yield is also unchanged at 4.65%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 3.46%.

Treasury yields were lower on Tuesday as November’s consumer confidence fell significantly following the government shutdown. Retail sales rose less than expected, while both the headline and core Producer Price Index rose month-over-month (MOM), reversing from the prior month’s deflation. October pending home sales rose 1.9% MOM, beating expectations. The yield on the 10-year note was down two basis points (0.02%) to 4.00%, while the 30-year bond yield also fell two basis points (0.02%) to 4.65%. The yield on the two-year note decreased four basis points (0.04%) to 3.46%.

On the data front, the Mortgage Bankers Association’s gauge of mortgage applications increased by 0.2% for the week ending November 21 versus the prior week’s decrease of 5.2%. Initial jobless claims for the week ending November 22 are expected to come in at 225,000, higher than the prior week’s 220,000, while continuing claims are expected to fall to 1.96 million for the week ending November 15 from the prior week’s 1.97 million. Meanwhile, the preliminary reading of September’s durable goods orders is forecasted to show a 0.5% MOM increase, compared to the prior month’s 2.9% increase. The Market News International Chicago purchasing managers’ index for November is expected to come in at 43.6, down from the prior month’s 43.8. The Department of Energy’s measure of crude oil inventories is expected to have decreased by 2.36 million barrels for the week ending November 21 versus the prior week’s decrease of 3.43 million barrels.

In the auction space, the U.S. Treasury is set to issue $100 billion in four-week bills, $85 billion in eight-week bills, $69 billion in 17-week bills, and $44 billion in seven-year notes.

The Bloomberg 30-day visible supply rose $1.496 billion to $10.153 billion on Tuesday, below the 12-month average of $13.829 billion.

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