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Bond Market Commentary

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

December 9, 2022

Over in bond land, Treasury yields are little changed ahead of the opening bell Friday as investors await the release of November’s Producer Price Index (PPI). This wholesale figure will assist in providing further insight into whether the Federal Reserve’s (Fed) rate hikes have started to ease inflation. The yield on the benchmark 10-year note is down one basis point (0.01%) to 3.48%, while the 30-year bond yield is gaining one basis point (0.01%) to 3.45%. The yield on the more policy-sensitive two-year note is declining four basis points (0.04%) to 4.28%. Yesterday, Treasury yields climbed as investors remain uncertain about the future course of interest rate hikes from the Fed. This comes after multiple economic data releases suggested rates may need to continue to be hiked further as the readings came in stronger-than-expected. Meanwhile, initial jobless claims increased to 230,000 in the week ended December 3, up from the prior week’s 226,000 print. While claims increased, they remain near historic lows and provide minimal evidence of a softening labor market. The yield on the benchmark 10-year note climbed eight basis points (0.08%) to 3.49%, while the yield on the 30-year bond increased two basis points (0.02%) to 3.44%. The yield on the two-year note, which is more sensitive to changes in Fed policy, gained seven basis points (0.07%) to 4.32%.

On the data front, market participants can expect November’s reading of the PPI early this morning. Core PPI (which excludes volatile food and energy) is forecasted to have increased 0.2% month-over-month and 5.9% annually. Meanwhile, the headline PPI for November’s monthly figure is expected to remain unchanged from October’s 0.2% print and is estimated to have slightly decreased to a 7.2% annual growth rate from October’s 8% annualized figure. Rounding out today’s docket, December’s preliminary data for the University of Michigan’s Consumer Sentiment Index is forecasted to have slightly increased 0.1 from November’s finalized 56.8. The University of Michigan’s short-term and long-term inflation reading are estimated to remain unchanged from the prior month’s 4.9% and 3%, respectively.

Mortgage rates declined for the fourth consecutive week amid limited economic growth. Within the past four weeks, rates have dropped 0.75%, the largest decline since 2008. For the week ending December 8, the average 30-year fixed rate mortgage fell 16 basis points (0.16%) to 6.33% versus 3.10% a year ago and compared to a record low of 2.65% set in January 2021. The 15-year rate slid nine basis points (0.09%) to 5.67%, in contrast to the 2.38% level at this time last year.

Municipal Market Commentary

The Bloomberg 30-day visible supply fell $398 million to $6.331 billion on Thursday, below the 12-month average of $9.893 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. Additional information available by request.

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