Bond Market Update

Data Recon

• The August ISM Manufacturing Index checked in at 47.2% (Briefing.com consensus 47.5%) versus 46.8% in July. The dividing line between expansion and contraction is 50.0%, so the August reading suggests there was a slower pace of contraction in the manufacturing sector versus the prior month. This was the fifth straight month (and 21st out of 22) 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.
• Total construction spending declined 0.3% month-over-month in July (Briefing.com consensus 0.2%) following an upwardly revised 0.0% (from -0.3%) in June. Total private construction was down 0.4% month-over-month while total public construction was up 0.1% month-over-month. On a year-over-year basis, total construction spending was up 6.7%.
  • The key takeaway from the report is that new single-family construction was weak in July.
• Yield Check:
  • 2-yr: -7 bps to 3.86%
  • 3-yr: -7 bps to 3.72%
  • 5-yr: -7 bps to 3.64%
  • 10-yr: -7 bps to 3.84%
  • 30-yr: -7 bps to 4.13%