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Bond Market Commentary

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

August 16, 2022

Over in bond land, Treasuries are little changed ahead of the opening bell Tuesday as investors await the latest housing data reports and look toward tomorrow’s release of the FOMC (Federal Open Market Committee) meeting minutes. Lingering concerns about an economic pullback continue to flatten the overall yield curve, with shorter-dated yields advancing amid the expectation that the Federal Reserve (Fed) is likely to continue hiking interest rates to combat elevated inflation--even at the risk of inciting a recession. The yield on the benchmark 10-year note is holding steady at 2.80%, while the yield on the two-year note is rising one basis point (0.01%) to 3.21%. The negative (and persistent) yield spread between the two maturities keeps widening, garnering attention as a signal of a looming recession. The yield on the 30-year bond is down two basis points (0.02%) to 3.09%. On the data front, updates at 8:30 a.m. ET are forecasted to show housing starts fell 2.1% in July, while building permits likely dropped 3.3% during the same period. Separately, industrial production is projected to have rebounded 0.3% last month following June’s 0.2% decline. Yesterday, Treasuries caught a bid as Wall Street digested a flurry of downbeat economic releases. A measure of homebuilder sentiment--considered a leading economic indicator--fell for an eighth straight month in its longest downtrend since 2007. Separately, the New York Fed’s empire manufacturing survey unexpectedly dipped to -31.3 in August, the second-worst print on record. Overseas, reports showed China’s retail sales, investment, and industrial production all fell short of estimates in July, while the nation’s central bank unexpectedly slashed key interest rates in a bid to prop up the world’s second-largest economy. The yield on the 10-year Treasury note ended the session four basis points (0.04%) lower at 2.80%.

Municipal Market Commentary

The Bloomberg 30-day visible supply rose $5.040 billion to $13.545 billion on Monday, above the 12-month average of $11.451 billion.

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