Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Wednesday as investors are awaiting today’s July Consumer Price Index (CPI). As of 6:57 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 4.67%, while the 30-year bond yield is also falling two basis points (0.02%) to 5.22%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down one basis point (0.01%) to 4.20%.

Treasury yields were lower on Tuesday as investors closely watched developments in the Strait of Hormuz. Meanwhile, existing home sales in July fell to an annualized pace of 4.06 million from June’s revised 4.13 million pace. The yield on the 10-year note was down two basis points (0.02%) to 4.69%, while the 30-year bond yield fell one basis point (0.01%) to 5.24%. The yield on the two-year note decreased three basis points (0.03%) to 4.21%.

On the data front, the Mortgage Banker Association’s gauge of mortgage applications increased by 3.6% for the week ending August 7 versus the prior week’s decrease of 2.9%. The headline CPI for July is expected to show price increases of 0.1% month-over-month (MOM) and 3.4% year-over-year (YOY), versus the prior month’s decline of 0.4% and increase of 3.5%, respectively. Meanwhile, core CPI is expected to show price increases of 0.2% MOM and 2.5% YOY, versus the prior month’s little change and increase of 2.6%, respectively. Data on July’s average hourly and weekly earnings is also scheduled for release. The Department of Energy’s measure of crude oil inventories is expected to have decreased by 1.80 million barrels for the week ending August 7 versus the prior week’s increase of 2.48 million barrels. The U.S. federal budget deficit for February is expected to widen to $346.0 billion from the prior month’s $291.1 billion. 

In the auction space, the U.S. Treasury is set to issue $72 billion in 17-week bills and $42 billion in ten-year notes.

The Bloomberg 30-day visible supply rose $5.116 billion to $26.215 billion on Tuesday, a 12-month high, compared to the 12-month average of $14.250 billion.

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