October 20, 2021
Treasuries are little changed ahead of the opening bell on Wednesday, as investors await the next catalyst for bond markets. The yield on the benchmark 10-year note is holdings steady at 1.64%, near its highest level since late May. The 30-year bond rate is adding one basis point to 2.10%, while the two-year note yield is off one basis point to 0.39%. The early moves follow a mixed session for Treasuries on Tuesday. The yield curve steepened as investors reined in their expectations for near-term monetary tightening from global central banks.
U.S. Fed fund futures data from CME Group showed markets pricing in a 64% probability for a rate hike next July, falling from 82% on Monday.
The more Fed-sensitive two-year note yield fell two basis points to 0.40%, while the yield on the 10-year note jumped five basis points to 1.64% and the 30-year bond rate climbed six basis points to 2.09%.
Market participants also assessed weaker-than-anticipated housing data on Tuesday, with housing starts and building permits both falling in September. The former unexpectedly declined 1.6% and the latter experienced its biggest monthly drop since February (-7.7%).
On the data front today, the lone update showed that MBA mortgage applications slid 6.3% in the week ending October 15, as higher mortgage rates dampened demand for refinancing and new purchases.
In central bank news, the Federal Reserve will release its Beige Book at 2:00 pm ET, which should provide anecdotal evidence of the economic conditions of the Fed’s 12 regions.
On the auction front, the U.S. Treasury is slated to sell $24 billion of 20-year bonds later this afternoon.
Municipal Market Commentary
The Bloomberg 30-day visible supply rose $3.151 billion to $17.481 billion on Tuesday, above the 12-month average of $11.334 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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