Bond Market Update

Data Recon

• Personal income increased 0.4% month-over-month in December, as expected, following a 0.3% increase in November. Personal spending jumped 0.7% month-over-month (Briefing.com consensus 0.5%) on the heels of an upwardly revised 0.6% increase (from 0.4%) in November. The PCE Price Index rose 0.3% month-over-month, as expected, leaving it up 2.6% year-over-year versus 2.4% in November. The core-PCE Price Index increased 0.2% month-over-month, as expected, leaving it up 2.8% year-over-year for the third month in a row.
  • The key takeaway from the report is that consumer spending is strong (which we knew from the Adv. Q4 GDP report) and that inflation is sticky above the Fed's 2% target, making it clear why the Fed said it isn't in a hurry to adjust its policy stance.
• The Q4 Employment Cost Index showed compensation costs for civilian workers increased 0.9% (Briefing.com consensus 0.9%), seasonally adjusted, for the three-month period ending in December 2024 versus 0.8% for the third quarter.
  • The key takeaway from the report is that compensation costs moderated to 3.8% for the 12-month period ending in December 2024 from 4.2% for the 12-month period ending in December 2023.
• Yield Check:
  • 2-yr: +1 bp to 4.21%
  • 3-yr: +1 bp to 4.25%
  • 5-yr: +1 bp to 4.32%
  • 10-yr: +1 bp to 4.52%
  • 30-yr: +1 bp to 4.77%