Bond Market Update

Data Recon

• The ISM Services PMI increased to 53.5% in February (Briefing.com consensus 53.0%) from 52.8% in January. The dividing line between expansion and contraction is 50.0%, so the February reading reflects services sector activity expanding but at a faster pace than the prior month. February marked the 54th time in 57 months that the Services PMI indicated expansion.
  • The key takeaway from the report is that the pace of expansion in the nation's largest sector accelerated in February, taking a little edge off the market's growth concerns; however, the acceleration in activity was also accompanied by an acceleration in prices.
• Factory orders increased 1.7% month-over-month in January (Briefing.com consensus 1.3%) following an upwardly revised 0.6% decline (from -0.9%) in December. Excluding transportation, factory orders rose 0.2% on the heels of a 0.3% increase in December. Shipments of manufactured goods jumped 0.4% in January following a 0.6% increase in December.
  • The key takeaway from the report is that it reflected not only a rebound in orders for nondefense aircraft and parts, but a nice pickup in business spending overall, evidenced by the 0.8% jump in new orders for nondefense capital goods excluding aircraft.
• Yield Check:
  • 2-yr: -2 bps to 3.94%
  • 3-yr: UNCH at 3.95%
  • 5-yr: +1 bp to 4.01%
  • 10-yr: +2 bps to 4.23%
  • 30-yr: +2 bps to 4.54%