Bond Market Update

Data Recon

• The September ISM Manufacturing Index checked in at 47.2% (Briefing.com consensus 47.7%), unchanged from August. The dividing line between expansion and contraction is 50.0%, so the September reading suggests the pace of contraction in the manufacturing sector was the same as the prior month. This was the sixth straight month (and 22nd out of 23) that economic activity in the manufacturing sector contracted.
  • The key takeaway from the report is that it has reinforced the understanding that conditions in the U.S. manufacturing sector are weak, reflected further in the weakening employment index.
• Total construction spending declined 0.1% month-over-month in August (Briefing.com consensus 0.1%) following a downwardly revised 0.5% decline (from -0.3%) in July. Total private construction was down 0.2% month-over-month while total public construction was up 0.3% month-over-month. On a year-over-year basis, total construction spending was up 4.1%.
  • The key takeaway from the report is that new single-family construction weakened further despite sliding interest rates.
• Yield Check:
  • 2-yr: -7 bps to 3.58%
  • 3-yr: -9 bps to 3.48%
  • 5-yr: -10 bps to 3.48%
  • 10-yr: -10 bps to 3.70%
  • 30-yr: -10 bps to 4.04%