Bond Market Commentary

Over in bond land, Treasury yields are mostly lower before the opening bell Wednesday following President Donald Trump announcing that tariffs on pharmaceutical goods and semiconductor imports could potentially come into effect as soon as August 1. Investors are also looking forward to June’s Producer Price Index (PPI) and industrial production data, along with the Federal Reserve’s (Fed’s) Beige Book survey of regional economic conditions. As of 6:48 AM ET, the yield on the 10-year note is decreasing one basis point (0.01%) to 4.47%, while the 30-year bond yield is falling two basis points (0.02%) to 5.00%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is unchanged at 3.94%.

Treasury yields were higher on Tuesday as the June Consumer Price Index (CPI) accelerated in line with expectations on a headline basis to a 2.7% year-over-year (YOY) increase. Meanwhile, the core CPI (which excludes food and energy) came in cooler than expected month-over-month (MOM) as it accelerated to 2.9% YOY. The yield on the 10-year note was up five basis points (0.05%) to 4.48%, while the 30-year bond yield rose four basis points (0.04%) to 5.02%. The yield on the two-year note increased four basis points (0.04%) to 3.94%.

On the data front, the Mortgage Banker Association’s gauge of mortgage applications increased by 10.0% for the week ending July 11 versus the prior week’s increase of 9.4%. The headline PPI for June is expected to show price increases of 0.2% MOM and 2.5% YOY versus the prior month’s increases of 0.1% and 2.6%, respectively. The core PPI is expected to show price increases of 0.2% MOM and 2.7% YOY versus the prior month’s increases of 0.1% and 3.0%, respectively. The New York Fed will release their Business Leaders Survey for July. Industrial production is forecasted to have increased 0.1% MOM in June versus the prior month’s decrease of 0.2%, while capacity utilization is forecasted to remain steady at 77.4%. The Department of Energy’s measure of crude oil inventories for the week ending July 11 will be released today.

In the auction space, the U.S. Treasury is set to issue $65 billion in 17-week bills.

In the central bank space, Fed Governor Michael Barr, Richmond Fed President Tom Barkin, Atlanta Fed President Raphael Bostic, Cleveland Fed President Beth Hammack, and New York Fed President John Williams are scheduled to speak today.

The Bloomberg 30-day visible supply rose $2.177 billion to $22.612 billion on Tuesday, above the 12-month average of $13.951 billion.

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