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Bond Market Commentary

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

August 7, 2020


Thursday's Action

The U.S Treasury yield curve flattened slightly on Thursday as investors awaited any developments on further stimulus aid from Washington and digested “better-than-feared” weekly unemployment claims. The yield on the benchmark 10-year note finished down one basis point to 0.54%, unchanged since last Friday’s (July 31) close. The yield on the 30-year bond was down two basis points to 1.20%, while the yield on the two-year note was steady at 0.12%. On the data front, initial jobless claims came in at 1.18 million in the week ended August 1, the lowest since the COVID-19 pandemic started. The number also eased from the prior period’s 1.43 figure, which had represented a second-straight weekly uptick in new claims. Still, today’s report marked the 20th-consecutive reading above 1 million. Wall Street will pay close attention to Friday’s more comprehensive non-farm payrolls report, with President Trump boosting expectations by saying, "a big number coming out Friday on jobs." In central bank news, the Bank of England opted to leave its benchmark rate unchanged at a record low of 0.10%. Policymakers indicated they have no plans to implement a negative interest rate policy anytime soon, which helped boost the British pound to a five-month high. Domestically, U.S. Federal Reserve Dallas Fed President suggested that small and medium-sized businesses could use more financial assistance to improve their odds of surviving the current economic downturn.

Mortgages

Mortgage rates declined further in the latest week, according to the Freddie Mac Primary Market Mortgage Survey® (PMMS®). Suppressed rates continue to support demand, though a lack of supply, particularly for entry-level homes, remains a hindrance to new buyers. For the period ending August 6, 2020, the 30-year fixed rate fell 11 basis points to 2.88%, notching its eighth all-time low of the year. This compares to 3.60% at this time last year. The 15-year fixed rate mortgage rate was down seven basis points to 2.44%, versus 3.05% a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 2.90%, dropping four basis points from the prior week and compares to 3.36% at this time last year.

Municipal Market Commentary

Tax-exempt new issue supply is expected to total $4.4 billion during the week of August 3rd, compared to the 2020 weekly average of $5.7 billion. The Bloomberg 30-day visible supply rose $276 million to $13.435 billion on Thursday, below the 12-month average of $14.570 billion.

This information is obtained from sources and data considered to be reliable, but its accuracy and completeness is not guaranteed by Wells Fargo Advisors.

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