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Bond Market Commentary

Updates on bond market data, news, and activity each day.

December 3, 2021

Over in bond land, Treasuries are holding steady ahead of the opening bell Friday as market participants await this week’s key economic data updates, including November’s jobs report. The yield on the benchmark 10-year note is holding firm at 1.43%, on track for a six basis point weekly decline (100 basis point equals 1%). Meanwhile the yield on the 30-year bond remains relatively unchanged at 1.75%, after hitting its lowest level since the beginning of 2021 in the previous session. On the shorter end of the curve, the yield on the two-year note is unchanged at 0.62%. On the data front, the U.S. Labor Department’s “first Friday” jobs report is set to be released at 8:30 a.m. ET, highlighting the week’s data docket, as the update could potentially impact the Federal Reserve’s tapering timeline. Non-farm payrolls are forecasted to have risen by 550,000 in November, building on to the prior month’s better-than-expected 531,000 gain. The unemployment rate likely dropped to 4.5% from October’s 4.6% figure, along with an anticipated increase in the labor force participation rate. Moreover, wage inflation is expected to have risen 5.0% year-over-year during the period, up from the previous 4.9% year-over-year pace. Separately, the Institute for Supply Management (ISM) is expected to reveal that U.S. service sector growth slowed down slightly in November after the sector expanded at a record clip the previous month. Rounding out the docket will be updates on factory orders, along with durable and capital goods orders. In central bank news, St. Louis Fed President James Bullard is slated to give remarks later this morning at 9:15 a.m. ET. This follows Thursday’s session, during which Treasuries finished lower as U.S. equities rebounded from a two-day rout. Shorter-dated yields especially spiked on the day after several Fed officials--including Fed Governor Randal Quarles, Atlanta Fed President Raphael Bostic and San Francisco Fed President Mary Daly--added to Fed Chair Jerome Powell’s perceived hawkish remarks earlier this week regarding expediting the tapering process amid higher inflation. The yield on the two-year note jumped seven basis points to 0.62%, while the yield on the 10-year note rose two basis points to 1.43%. The spread between the two yields remains near the tightest of the year. On the data front yesterday, weekly initial jobless claims came in at a better-than-anticipated 222,000.

Mortgage rates were little changed in the latest week, according to the Freddie Mac Primary Market Mortgage Survey® (PMMS®), despite an overall pick-up in volatility across financial markets. Mortgage rates have failed to break out of a narrow range this year, largely due to lingering pandemic uncertainty. For the period ending December 2, 2021, the 30-year fixed rate rose one basis point to 3.11%, still below a near-term peak of 3.18% reached in April. This compares to 2.71% at this time last year and to its record low of 2.65% reached in early January. The 15-year fixed mortgage rate slipped three basis points to 2.39%, versus 2.26% a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 2.49%, up two basis points from the prior week and compares to 2.86% at this time last year.

Municipal Market Commentary

The Bloomberg 30-day visible supply fell $2.159 billion to $15.668 billion on Thursday, above the 12-month average of $11.294 billion.

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