Bond Market Update

Data Recon

• Personal income increased a robust 0.9% month-over-month (Briefing.com consensus 0.3%), led by a 1.8% jump in personal current transfer receipts, following a 0.4% increase in December. Personal spending, however, declined 0.2% month-over-month (Briefing.com consensus 0.2%) following an upwardly revised 0.8% increase (from 0.7%) in December. The PCE Price Index was up 0.3% month-over-month, as expected, and up 2.5% year-over-year versus 2.6% in December. The core-PCE Price Index was up 0.3%, also as expected, and was up 2.6% year-over-year versus 2.9% in December.
  • The key takeaway from the report isn't singular. There are two: there was welcome disinflation on a year-over-year basis, yet there was a noticeable 0.5% month-over-month decline in real personal spending, which is going to be a big drag on Q1 GDP forecasts. Net-net, not a great report for the growth outlook considering, too, that the personal savings rate jumped to 4.6% from 3.5%.
• The January Adv. Intl. Trade in Goods Report showed a large widening in the deficit to $153.3 billion from a revised $122.0 billion (from -$122.1 billion) in December. Adv. Retail Inventories declined 0.1% month-over-month following a downwardly revised 0.5% decline (from -0.3%) in December. Adv. Wholesale Inventories increased 0.7% month-over-month following an upwardly revised 0.4% decline (from -0.5%) in December.
  • The key takeaway from the report is the widening goods deficit. That was likely a byproduct of the tariff push as importers worked to get ahead of the tariffs, yet it will likely stoke President Trump's push to get going with the tariff implementation.
• Yield Check:
  • 2-yr: -4 bps to 4.04%
  • 3-yr: -4 bps to 4.02%
  • 5-yr: -5 bps to 4.06%
  • 10-yr: -4 bps to 4.24%
  • 30-yr: -3 bps to 4.53%