Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Wednesday ahead of today’s June Producer Price Index (PPI) data. Investors are closely monitoring developments in the Iran war and will be watching today’s testimony from Federal Reserve (Fed) Chair Kevin Warsh before the U.S. Senate Banking Committee. As of 7:01 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.60%, while the 30-year bond yield is also increasing one basis point (0.01%) to 5.11%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up two basis points (0.02%) to 4.21%. 

Treasury yields were lower on Tuesday as June’s Consumer Price Index (CPI) came in softer than forecasted, with the year-over-year (YOY) rate easing to 3.5% as prices fell 0.4% month-over-month (MOM). Meanwhile, core CPI was flat MOM in June and cooled to 2.6% YOY. Investors also assessed Fed Chair Kevin Warsh's testimony before the House Financial Services Committee for insights into the Fed's policy outlook. The yield on the 10-year note was down three basis points (0.03%) to 4.59%, while the 30-year bond yield fell one basis point (0.01%) to 5.10%. The yield on the two-year note decreased nine basis points (0.09%) to 4.19%.

On the data front, the Mortgage Banker Association’s gauge of mortgage applications fell by 2.7% for the week ending July 10 versus the prior week’s decrease of 2.2%. The New York Fed will release their Empire Manufacturing Survey for July, with the headline general business conditions index expected to rise to 9.2 from the prior month’s 5.7. The headline PPI for June is expected to show little change MOM and increase of 6.2% YOY versus the prior month’s increases of 1.1% and 6.5%, respectively. The core PPI, which excludes volatile components like food and energy, is expected to show price increases of 0.3% MOM and 5.1% YOY versus the prior month’s increases of 0.4% and 4.9%, respectively. The Department of Energy’s measure of crude oil inventories is expected to decline by 1.824 million barrels for the week ending July 10 versus the prior week’s decline of 2.998 million barrels. The Fed will release their Beige Book survey of regional economic conditions.

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

In the central bank space, Fed Chair Kevin Warsh, Fed Governor Lisa Cook, St. Louis Fed President Alberto Musalem, and New York Fed President John Williams are scheduled to speak today.

The Bloomberg 30-day visible supply rose $3.464 billion to $21.390 billion on Tuesday, above the 12-month average of $14.042 billion.

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