Bond Market Update

Data Recon

• The July ISM Manufacturing Index checked in at 48.0% for July (Briefing.com consensus: 49.5%), down one percentage point from the 49.0% reading for June. The dividing line between expansion and contraction is 50.0%, so the July figure suggests manufacturing activity contracted at a faster pace than the prior month.
  • The key takeaway from the report is that 79% of the sector's GDP contracted in July. That is up from 46% in June and suggests the manufacturing sector has not yet seen the benefits of onshoring in response to the tariff actions, which themselves have stoked a good bit of planning uncertainty per the observations of survey respondents.
• Total construction spending decreased 0.4% month-over-month in June (Briefing.com consensus: 0.1%) following a downwardly revised 0.4% decline (from -0.3%) in May. Total private construction was down 0.5% month-over-month, while total public construction was up 0.1% month-over-month. On a year-over-year basis, total construction spending was down 2.9%.
  • The key takeaway from the report is the same as the prior month: a downturn in new single-family construction, which is being pressured by higher costs, was the driver behind the weakness in residential spending.
• The final University of Michigan Consumer Sentiment Index for July dipped to 61.7 (Briefing.com consensus: 61.8) from the preliminary reading of 61.8. The final reading for June was 60.7. In the same period a year ago, the index stood at 66.4.
  • The key takeaway from the report is that consumer sentiment, while not strong, has improved in recent months along with inflation expectations.
• Yield Check:
  • 2-yr: -22 bps to 3.73%
  • 3-yr: -20 bps to 3.70%
  • 5-yr: -17 bps to 3.79%
  • 10-yr: -12 bps to 4.24%
  • 30-yr: -8 bps to 4.81%