Bond Market Commentary

Over in bond land, Treasury yields are mostly lower before the opening bell Friday ahead of the holiday weekend as investors are awaiting the finalized May reading of consumer sentiment from the University of Michigan. Investors are also evaluating progress on the latest negotiations to end the Iran war and open the Strait of Hormuz. As of 6:52 AM ET, the yield on the 10-year note is decreasing one basis point (0.01%) to 4.56%, while the 30-year bond yield is also falling one basis point (0.01%) to 5.08%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 4.08%.

Treasury yields were mixed on Thursday as S&P Global’s preliminary May purchasing managers’ index (PMI) readings showed the manufacturing index rising to 55.3 and the services index falling to 50.9. Meanwhile, housing-market data came in better than expected, initial jobless claims declined, and continuing claims for the week prior came in below expectations. The yield on the 10-year note was down two basis points (0.02%) to 4.57%, while the 30-year bond yield fell three basis points (0.03%) to 5.09%. The yield on the two-year note increased two basis points (0.02%) to 4.08%. As of end of day Thursday (May 21), futures markets are pricing in no change in the policy rate at the Federal Reserve's (Fed’s) upcoming June meeting, with a cumulative 21 basis points (0.21%) worth of rate hikes by year-end 2026.

On the data front, the finalized May reading of consumer sentiment from the University of Michigan is expected to come in at 48.2, similar to preliminary reading, while one-year and 5-10-year inflation expectations are projected to come in at 4.6% and 3.4%, compared to the preliminary readings of 4.5% and 3.4%, respectively. The Federal Reserve Bank of Kansas City will release their Services Survey for May, with the composite index expected to come in at 5, up from the prior month’s 3.

In the central bank space, Fed Governor Christopher Waller is scheduled to speak today.

Mortgage rates were higher in the latest week. For the week ending May 21, the average 30-year fixed mortgage rate was up 15 basis points (0.15%) to 6.51%, versus 6.86% a year ago. The 15-year fixed mortgage rate increased 14 basis points (0.14%) to 5.85%, versus 6.01% a year ago.

The Bloomberg 30-day visible supply fell $2.068 billion to $16.743 billion on Thursday, above the 12-month average of $13.942 billion.

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