Bond Market Update

Data Recon

• The January ISM Manufacturing Index checked in at 50.9% (Briefing.com consensus 49.1%) versus a downwardly revised 49.2% (from 49.3%) in December. The dividing line between expansion and contraction is 50.0%, so the January reading suggests manufacturing sector activity accelerated versus the prior month and returned to expansion territory.
  • The key takeaway from the report is that manufacturing sector activity overall moved into expansion territory for the first time after 26 straight months of contraction, underscoring an improved demand backdrop seen in the pickup in the new orders and employment indexes.
• Total construction spending increased 0.5% month-over-month in December (Briefing.com consensus 0.2%) following an upwardly revised 0.2% increase (from 0.0%) in November. Total private construction was up 0.9% month-over-month while total public construction declined 0.5% month-over-month. On a year-over-year basis, total construction spending was up 4.3%.
  • The key takeaway from the report is that new single-family construction activity picked up despite rising interest rates.
• Yield Check:
  • 2-yr: -3 bps to 4.21%
  • 3-yr: -5 bps to 4.23%
  • 5-yr: -8 bps to 4.29%
  • 10-yr: -11 bps to 4.46%
  • 30-yr: -11 bps to 4.70%