Bond Market Update

Data Recon

• Personal income increased 0.4% month-over-month in September (Briefing.com consensus: 0.4%) following a 0.4% increase in August. Personal spending jumped 0.3% month-over-month (Briefing.com consensus: 0.4%) following a downwardly revised 0.5% increase (from 0.6%) in August. Real PCE, though, was flat. The PCE Price Index was up 0.3% month-over-month, as expected, and the core PCE Price Index, which excludes food and energy, was up 0.2% (Briefing.com consensus: 0.3%). On a year-over-year basis, the PCE Price Index was up 2.8%, versus 2.7% in August and 2.3% in April, and the core PCE Price Index was up 2.8%, versus 2.9% in August and 2.6% in April.
  • The key takeaway from the report is that it revealed a very sticky inflation component that remains well above the Fed's 2.0% inflation target. That likely won't prevent the Fed from cutting rates next week, but it will likely factor into a "hawkish cut," as the Fed implies it will be inclined to wait longer for the next rate cut.
• The preliminary University of Michigan Consumer Sentiment reading for December increased to 53.3 (Briefing.com consensus: 52.0) from the final reading of 51.0 for November. In the same period a year ago, the index stood at 74.0.
  • The key takeaway from the report is its note that consumers' overall view can still be thought of as broadly somber, notwithstanding the month-over-month increase, due to the burden of high prices.
• Yield Check:
  • 2-yr: +1 bp to 3.54%
  • 3-yr: +1 bp to 3.56%
  • 5-yr: +1 bp to 3.69%
  • 10-yr: +1 bp to 4.12%
  • 30-yr: +1 bp to 4.78%