Bond Market Commentary

Over in bond land, Treasury yields are lower before the opening bell Thursday ahead of today’s comments from Federal Reserve (Fed) Chair Jerome Powell. Investors are also looking forward to April’s Producer Price Index (PPI), retail sales, industrial production, and fresh unemployment claims data. As of 6:46 AM ET, the yield on the 10-year note is decreasing three basis points (0.03%) to 4.51%, while the 30-year bond yield is falling two basis points (0.02%) to 4.95%. The yield on the two-year note, which is more sensitive to changes in monetary policy, is down two basis points (0.02%) to 4.03%.

Treasury yields were higher on Wednesday following comments from several Fed members, with Vice Chair Philip Jefferson noting tariffs “are likely to interrupt progress on disinflation and generate at least a temporary rise in inflation.” The yield on the 10-year note was up seven basis points (0.07%) to 4.54%, while the 30-year bond yield rose six basis points (0.06%) to 4.97%. The yield on the two-year note increased five basis points (0.05%) to 4.05%.

On the data front, the New York Fed will release May’s Empire State Manufacturing Survey, with the headline general business conditions index expected to come in at negative 8.0, up from the prior month’s negative 8.1. Retail sales are expected to show little change month-over-month (MOM) in April versus the prior month’s revised 1.5% increase. The headline PPI for April is expected to show price increases of 0.2% MOM and 2.5% year-over-year (YOY) versus the prior month’s decline of 0.4% and increase of 2.7%, respectively. The core PPI is expected to show price increases of 0.3% MOM and 3.1% YOY versus the prior month’s decline of 0.1% and increase of 3.3%, respectively. Initial jobless claims for the week ending May 10 are expected to come in at 228,000, similar to prior week’s reading. Continuing claims are expected to come in at 1.89 million for the week ending May 3, up from the prior week’s 1.88 million. The Philadelphia Fed will release their May Manufacturing Business Outlook Survey, with the diffusion index of current general activity forecasted to improve to negative 11.0 from the prior month’s negative 26.4. Industrial production is expected to have expanded by 0.1% MOM in April, compared to the prior month’s decline of 0.3%, while capacity utilization is forecasted to remain steady at 77.8%. Business inventories are expected to have increased 0.2% MOM in March, similar to prior month’s reading. The National Association of Home Builders’ Housing Market Index is forecasted to come in at 40 for May, unchanged from the prior reading.

In the auction space, the U.S. Treasury is set to issue $85 billion in four-week bills and $75 billion in eight-week bills.

In the central bank space, Fed Chair Jerome Powell and Fed Governor Michael Barr are scheduled to speak today. The Second Thomas Laubach Research Conference will begin today.

The Bloomberg 30-day visible supply fell $646 million to $19.779 billion on Wednesday, compared to the 12-month average of $13.127 billion.

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