Bond Market Update

Data Recon

• The ISM Services PMI decreased to 50.1% in July (Briefing.com consensus 51.5%) from 50.8% in June. The dividing line between expansion and contraction is 50.0%, so the July reading reflects services sector activity teetering on the brink of a contraction.
  • The key takeaway from the report is that it reflects a slowdown in growth for the country's largest sector, accompanied by a faster contraction in employment and a faster increase in prices. It is a combination that will provoke stagflation chatter.
    • The Business Activity/Production Index decreased to 52.6% from 54.2%.
    • The New Orders Index fell to 50.3% from 51.3%.
    • The Employment Index dipped to 46.4% from 47.2%.
    • The Prices Index rose to 69.9% from 67.5%.
    • The Supplier Deliveries Index jumped to 51.0% from 50.3%.
    • The Backlog of Orders Index increased to 44.3% from 42.4%.
• Yield check:
  • 2-yr: +4 bps to 3.72%
  • 3-yr: +3 bps to 3.68%
  • 5-yr: +3 bps to 3.77%
  • 10-yr: +2 bps to 4.22%
  • 30-yr: +1 bp to 4.21%