Bond Market Commentary

May 11, 2021

In bond land, Treasuries are little changed ahead of the opening bell Tuesday despite a sell-off in U.S. tech stocks looking to carry over into today's session. The yield on the benchmark 10-year note is up one basis point to 1.60%, while the yield on the 30-year bond is holding steady at 2.32%. On the short end of the curve, the yield on the two-year note is flat at 0.15%. On the data front, the NFIB's gauge of small business optimism improved less than expected in April, with the reading rising to 99.8 from a prior 98.2 print. Later this morning (10:00 a.m. ET), the Jobs Openings and Labor Turnover Survey (JOLTS) is anticipated to show 7.5 million available positions in March, up from 7.3 million in February. In the central bank space, a slew of Fed leaders will deliver remarks at various engagements today, including New York Fed President John Williams and Fed Governor Lael Brainard. Regional Fed presidents Daly, Bostic, Harker, and Kashkari are also slated to speak. In the auction space, the U.S. Treasury Department plans to sell $58 billion in three-year notes at 1:00 p.m. ET. Yesterday, $57 billion in 13-week bills were issued at a high yield of 0.015%, and $54 billion in 26-week bills were sold at a high yield of 0.035%. The bid-to-cover ratios--indicators of demand--came in at 2.72 and 3.28, respectively. Overall, the U.S. Treasury yield curve steepened on Monday as inflationary expectations mounted. The yield on the 10-year note rose two basis points to 1.59%, while the yield on the 30-year bond climbed five basis points to 2.32%. The five-year Treasury breakeven rate--a proxy for inflation expectations over the next five years--rose to 2.73%, the highest level since 2006. This compares to June 2020, when the level was below 1%. (Breakeven rates estimate the expected annual inflation rate over a maturity's timespan by subtracting the real yield of an inflation-linked Treasury Inflation Protected Security (TIPS) from the comparable maturity's nominal yield.) Another jump in commodity prices fueled the increase, with gasoline futures briefly spiking to a three-year high after a cybersecurity attack closed down a critical U.S. fuel pipeline.

The Bloomberg 30-day visible supply rose $101 million to $9.727 billion on Monday, below the 12-month average of $12.337 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.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.