Bond Market Commentary

Over in bond land, Treasury yields are higher before the opening bell Friday following Israeli strikes on Iran, which took out military leaders and was responded to by retaliatory strikes from Iran. Investors are also awaiting today’s economic releases, including the preliminary June reading of consumer sentiment from the University of Michigan, and looking ahead to next week’s Federal Reserve policy meeting. As of 6:47 AM ET, the yield on the 10-year note is rising one basis point (0.01%) to 4.37%, while the 30-year bond yield is increasing two basis points (0.02%) to 4.86%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is up two basis points (0.02%) to 3.93%.

Treasury yields were lower on Thursday as both the headline and core Producer Price Index (PPI) for May recorded cooler-than-expected increases of 0.1% month-over-month from last month’s revised declines of 0.2%. Meanwhile, the headline PPI accelerated to 2.6% year-over-year (YOY) and the core measure decelerated to 3.0% YOY from last month’s upwardly revised 2.5% and 3.2%, respectively. Both initial jobless claims and continuing claims rose more than forecasted. The yield on the 10-year note was down six basis points (0.06%) to 4.36%, while the 30-year bond yield fell eight basis points (0.08%) to 4.84%. The yield on the two-year note decreased four basis points (0.04%) to 3.91%.

On the data front, the University of Michigan’s preliminary June reading of consumer sentiment is forecasted to come in at 53.6, higher than the prior month’s 52.2. The one- and 5-10-year inflation expectations for June from the University of Michigan are expected to come in at 6.40% and 4.10%, respectively, compared to the prior month’s 6.60% and 4.20%, respectively.

Mortgage rates were lower in the latest week. For the week ending June 12, the average 30-year fixed mortgage rate was down one basis point (0.01%) to 6.84%, versus 6.95% a year ago. The 15-year fixed mortgage rate decreased two basis points (0.02%) to 5.97%, versus 6.17% a year ago.

The Bloomberg 30-day visible supply fell $5.284 billion to $11.404 billion on Thursday, compared to the 12-month average of $13.701 billion.

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