Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Wednesday ahead of today’s release of May new home sales and finalized building permits figures, along with the first quarter’s current account balance. Investors are also awaiting tomorrow’s May personal income, personal spending, and Personal Consumption Expenditures (PCE) deflator data. As of 6:58 AM ET, the yield on the 10-year note is decreasing two basis points (0.02%) to 4.48%, while the 30-year bond yield is falling three basis points (0.03%) to 4.92%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down one basis point (0.01%) to 4.19%. 

Treasury yields were mostly lower on Tuesday as S&P Global’s preliminary June readings showed the services and composite purchasing managers’ indexes (PMIs) rising more than expected to 51.3 and 52.2, respectively, with the manufacturing measure unexpectedly climbing to 55.7. The yield on the 10-year note was down one basis point (0.01%) to 4.50%, while the 30-year bond yield was unchanged at 4.95%. The yield on the two-year note decreased three basis points (0.03%) to 4.20%.

On the data front, the Mortgage Banker Association’s gauge of mortgage applications increased by 1.0% for the week ending June 19 versus the prior week’s decrease of 3.8%. The U.S. current account balance for the first quarter is expected to show a deficit of $208.9 billion, compared to the previous quarter’s deficit of $190.7 billion. Meanwhile, new home sales are projected to have been at an annualized 640,000 pace in May versus the prior month’s 622,000 pace. The Department of Energy’s measure of crude oil inventories is expected to have decreased by 3.60 million barrels for the week ending June 19 versus the prior week’s decrease of 8.26 million barrels. The finalized reading for May building permits is anticipated to be revised higher to an annualized 1.418 million, compared to the preliminary estimate of 1.413 million.

In the auction space, the U.S. Treasury is set to issue $69 billion in 17-week bills, $28 billion in two-year floating rate notes, and $70 billion in five-year notes.

In the central bank space, Federal Reserve Governor Lisa Cook is scheduled to speak today.

The Bloomberg 30-day visible supply rose $2.349 billion to $16.270 billion on Tuesday, above the 12-month average of $13.860 billion.

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