Bond Market Update

Data Recon

• The June ISM Manufacturing Index checked in at 48.5% (Briefing.com consensus 49.1%) versus 48.7% in May. The dividing line between expansion and contraction is 50.0%, so the June reading suggests there was a faster pace of contraction in the manufacturing sector last month. This was the third straight month (and 19th out of 20) that economic activity in the manufacturing sector contracted.
  • The key takeaway from the report is that each component remained in a state of contraction -- except prices, which slowed from the prior month -- signaling a state of subdued activity for the manufacturing sector that fits with a slowing economy.
• Total construction spending decreased 0.1% month-over-month in May (Briefing.com consensus 0.1%) following an upwardly revised 0.3% increase (from -0.1%) in April. Total private construction was down 0.3% month-over-month while total public construction was up 0.5% month-over-month. On a year-over-year basis, total construction spending was up 6.4%.
  • The key takeaway from the report was the drag in private residential spending that was driven by a decline in new single-family construction at a time when overall housing inventory has been constrained due to a lack of inventory for existing homes.
• Yield Check:
  • 2-yr: +4 bps to 4.76%
  • 3-yr: +6 bps to 4.57%
  • 5-yr: +9 bps to 4.42%
  • 10-yr: +11 bps to 4.45%
  • 30-yr: +12 bps to 4.62%