Bond Market Update

Data Recon

• Personal income increased 0.8% month-over-month in February (Briefing.com consensus 0.4%) following a downwardly revised 0.7% increase (from 0.9%) in January. Personal spending rose 0.4% month-over-month (Briefing.com consensus 0.6%) following a downwardly revised 0.3% decline (from -0.2%) in January. The PCE Price Index was up 0.3% month-over-month, as expected, which left it up 2.5% year-over-year, unchanged from January. The core-PCE Price Index jumped 0.4% month-over-month (Briefing.com consensus 0.3%), which left it up 2.8% year-over-year versus an upwardly revised 2.7% (from 2.6%) in January.
  • The key takeaway from the report is that it was good on the income side, just okay on the spending side (real PCE up just 0.1%), and bad on the inflation side with the uptick in the core-PCE Price Index. That mixed complexion, which is apt to stir some stagflation angst as well, will keep the Fed in a wait-and-watch mode, especially with near-term price adjustments likely as the tariffs take hold.
• Yield Check:
  • 2-yr: -2 bps to 3.98%
  • 3-yr: -3 bps to 3.97%
  • 5-yr: -4 bps to 4.05%
  • 10-yr: -6 bps to 4.31%
  • 30-yr: -7 bps to 4.66%