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Bond Market Commentary

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

September 17, 2021

In bond land, Treasuries are holding steady ahead of the opening bell Friday as yields remain in a holding pattern ahead of next week’s Federal Reserve policy meeting.

The yield on the benchmark 10-year note is flat at 1.34%, unchanged since last Friday’s (September 10) close. The yield on the 30-year bond is also steady at 1.88%, while on the short-end of the curve, the yield on the two-year note is anchored at 0.22%.

On the data front, a preliminary September reading on consumer sentiment from the University of Michigan (due at 10:00 a.m. ET), is expected to show a modest improvement to 72.0 from August’s near decade-low of 70.3.

Next week, all eyes will be on the Federal Open Market Committee (FOMC) meeting, with Wednesday’s policy statement and corresponding afternoon press conference from Fed Chair Jerome Powell headlining the slate. Market participants are likely to pay close attention to the Fed chief’s 2:30 p.m. ET remarks for any official tapering announcement or clues about exactly when the central bank will being dialing back pandemic-era stimulus.

Wall Street is expecting officials to explicitly hint at reducing the Fed’s bond-buying program next week, though a formal announcement is not generally anticipated until its November meeting. Additionally, policymakers will release fresh economic projections on Wednesday.

Yesterday, Treasuries weakened as investors digested mixed economic reports, including a stronger-than-expected update on consumer spending. Retail sales posted a surprise 0.7% advance in August, following a downwardly revised 1.8% drop in July. The figure excluding auto sales jumped 1.8%, the biggest gain in five months. Separately, initial jobless claims came in at 332,000 in the latest week, increasing more than forecasted from the prior period’s 312,000 pandemic low. Meanwhile, a gauge of business activity in the Philadelphia Fed region unexpectedly surged to 30.7 in September from last month’s 19.4 reading. The yield on the 10-year note finished four basis points higher at 1.34%.

The closely-monitored spread between five-year notes and 30-year bonds ended at 105 basis points, still near the smallest gap since August 2020. Elsewhere, sovereign bond yield spreads between El Salvador government securities and comparable maturities on U.S. Treasuries widened the most on record (to 986 basis points, or 9.86%) on concerns the Central American country may not be able to secure a $1 billion loan agreement with the International Monetary Fund (IMF) as the nation risks negative credit implications connected with its use of bitcoin.


Mortgage rates declined slightly in the latest week, though still remain little changed over the past two months, according to the Freddie Mac Primary Market Mortgage Survey® (PMMS®). Rates have stabilized as the lingering pandemic has somewhat dampened the outlook for economic growth. For the period ending September 16, 2021, the 30-year fixed rate slipped two basis points to 2.86%, staying below the 3% threshold for a 12th consecutive week, and down from a near-term peak of 3.18% in April. This compares to 2.87% at this time last year and to its record low of 2.65% reached in early January. The 15-year fixed mortgage rate declined seven basis points to 2.12%, versus 2.35% a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 2.51%, up nine basis points from the prior week and compares to 2.96% at this time last year.

Municipal Market Commentary

The Bloomberg 30-day visible supply rose $323 million to $14.177 billion on Thursday, above the 12-month average of $11.703 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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