Bond Market Commentary

Over in bond land, Treasuries are strengthening along the curve ahead of the opening bell Tuesday as investors digest yesterday’s hawkish commentary from regional Federal Reserve (Fed) officials. Boston Fed President Susan Collins said additional rate hikes are needed to curb inflation, even though it may result in economic pain, while Atlanta Fed President Raphael Bostic reiterated the fight to curb inflation was the Fed’s first priority. The benchmark 10-year note yield is sliding nine basis points (0.09%) to 3.81%, while the yield on the 30-year bond is down four basis points (0.04%) to 3.68%. The more Fed-sensitive two-year note is shedding eight basis points (0.08%) to 4.23%. Yesterday, Treasury yields continued their ascent to multi-year highs as investors assessed last week’s flurry of central bank monetary policy decisions. The yield on the two-year note added 12 basis points (0.12%) to 4.31%, hovering just below its highest level since 2007, which was reached earlier in the session. The 10-year note yield climbed 22 basis points (0.22%) to 3.90%, its highest level since April 2010, while the yield on the 30-year bond advanced 11 basis points (0.11%) to 3.72%. The Chicago Fed National Activity Index came in at 0 (a neutral reading) for August, down from the prior month’s 0.29 print. The Dallas Fed’s Manufacturing Activity Index fell to -17.2 in September, down from August’s -12.9 figure.

On the data front today, investors can expect updates for August on durable and capital goods orders and new home sales. Also on the docket are September readings from the Conference Board Consumer Confidence Index and the Richmond Fed Manufacturing Index. Housing price index readings for July from FHFA and S&P CoreLogic are also set to be released today. In the central bank sphere, market participants can look for commentary from a slew of Fed officials, including Fed Chairman Jerome Powell. In the auction space, the U.S. Treasury Department is set to issue $44 billion of five-year notes at 1:00 pm E.T. today. Yesterday, $43 billion of two-year notes were issued at a high yield of 4.29%. The bid-to-cover ratio (an indicator of demand) was 2.51.

The Bloomberg 30-day visible supply rose $2.615 billion to $8.729 billion on Monday, below the 12-month average of $11.269 billion.

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