Bond Market Update

Data Recon

• The July ISM Manufacturing Index checked in at 46.8% (Briefing.com consensus 48.5%) versus 48.5% in June. The dividing line between expansion and contraction is 50.0%, so the July reading suggests there was a faster pace of contraction in the manufacturing sector last month. This was the fourth straight month (and 20th out of 21) that economic activity in the manufacturing sector contracted.
  • The key takeaway from the report is that it conveys clear weakness in the manufacturing sector that is a byproduct of subdued demand.
• Total construction spending declined 0.3% month-over-month in June (Briefing.com consensus 0.1%) following a downwardly revised 0.4% decline (from -0.1%) in May. Total private construction was down 0.3% month-over-month while total public construction was down 0.4% month-over-month. On a year-over-year basis, total construction spending was up 6.2%.
  • The key takeaway from the report was that construction spending was soft across both the private and public sectors, reflecting weaker demand patterns that are part of a softening economy.
• Yield Check:
  • 2-yr: -14 bps to 4.20%
  • 3-yr: -15 bps to 3.99%
  • 5-yr: -15 bps to 3.85%
  • 10-yr: -13 bps to 3.98%
  • 30-yr: -11 bps to 4.26%