Bond Market Update

Data Recon

• The Producer Price Index for final demand increased 0.2% month-over-month in October (Briefing.com consensus 0.2%) following an upwardly revised 0.1% increase (from 0.0%) in September. Excluding food and energy, the index for final demand jumped 0.3% month-over-month (Briefing.com consensus 0.3%) after increasing 0.2% in September. With these monthly increases, the index for final demand was up 2.4% year-over-year, versus 1.9% in September, and the index for final demand, less food and energy, was up 3.1% year-over-year, versus 3.0% in September.
  • The key takeaway from the report is that there was inflation in this report -- not disinflation -- at the wholesale level. That will stir concerns about PCE inflation sticking at higher levels and the Fed not cutting rates as much as previously envisioned.
• Initial jobless claims decreased by 4,000 for the week ending November 9 to 217,000 (Briefing.com consensus 220,000). Continuing jobless claims for the week ending November 2 decreased by 11,000 to 1.873 million.
  • The key takeaway from the report is rooted in the low level of initial jobless claims -- a leading indicator -- which suggests employers are feeling reasonably good about the economic outlook, as they appear reluctant to layoff employees.
• Yield Check:
  • 2-yr: UNCH at 4.28%
  • 3-yr: UNCH at 4.26%
  • 5-yr: +1 bp to 4.31%
  • 10-yr: UNCH at 4.45%
  • 30-yr: -3 bps to 4.61%