Bond Market Update

Data Recon

• The Producer Price Index for final demand increased 0.4% month-over-month (Briefing.com consensus 0.2%) following an upwardly revised 0.5% increase (from 0.2%) in December. Excluding food and energy, the index for final demand increased 0.3% month-over-month (Briefing.com consensus 0.3%) following an upwardly revised 0.4% increase (from 0.0%) in December. On a year-over-year basis, the index for final demand was up 3.5% (3.51% unrounded) versus 3.5% in December (3.46% unrounded). Excluding food and energy, the index for final demand was up 3.6% (3.61% unrounded) versus 3.7% in December (3.75% unrounded).
  • The key takeaway from the report is that the month-over-month readings were less upsetting than the month-over-month readings seen in the CPI report. Also, the year-over-year readings look improved at first blush, yet the revisions moved the December year-over-year readings for PPI and core PPI higher (versus the initial readings), so the improvement in January is from a higher base, meaning it is relative and not absolute.
• (Sidenote: when the December PPI report was first released, PPI was up 3.3% year-over-year and core PPI was up 3.5%).
• Initial jobless claims for the week ending February 8 decreased by 7,000 to 213,000 (Briefing.com consensus 217,000) while continuing jobless claims for the week ending February 1 decreased by 36,000 to 1.850 million.
  • The key takeaway from the report is the low level of initial jobless claims, which continue to connote an otherwise positive demand outlook on the part of employers who are reluctant to cut staff.
• Yield Check:
  • 2-yr: -5 bps to 4.32%
  • 3-yr: -6 bps to 4.34%
  • 5-yr: -7 bps to 4.41%
  • 10-yr: -7 bps to 4.56%
  • 30-yr: -5 bps to 4.78%