Bond Market Update

Data Recon

• The Advance Q2 GDP report showed real GDP increasing at an annual rate of 2.8% (Briefing.com consensus 1.9%), following a 1.4% increase for the first quarter. The GDP Price Deflator was up 2.3% versus 3.1% in the first quarter.
  • The key takeaway from the report is that it didn't show any breakdown in consumer spending. In fact, consumer spending growth accelerated, increasing 2.3% on the heels of a 1.5% increase in the first quarter.
• Initial jobless claims for the week ending July 20 decreased by 10,000 to 235,000 (Briefing.com consensus 240,000). Continuing jobless claims for the week ending July 13 decreased by 9,000 to 1.851 million.
  • The key takeaway from the report is that there hasn't been an alarming jump in initial claims -- a leading indicator -- to even higher levels; therefore, a conclusion will be drawn that the labor market is seeing some normal slowing as opposed to a rapid deterioration.
• Durable goods orders in June sunk 6.6% month-over-month (Briefing.com consensus 0.4%). Excluding transportation, durable goods orders increased 0.5% month-over-month (Briefing.com consensus 0.2%).
  • The key takeaway from the report is that the weakness was driven by a large drop in nondefense aircraft and parts orders, which are volatile. An added takeaway is that business spending in June was quite solid, evidenced by the 1.0% increase in new orders for nondefense capital goods excluding aircraft.
• Yield Check:
  • 2-yr: -1 bp to 4.41%
  • 3-yr: -2 bps to 4.23%
  • 5-yr: -3 bps to 4.13%
  • 10-yr: -4 bps to 4.25%
  • 30-yr: -4 bps to 4.51%