Bond Market Update

Data Recon

• The third estimate for Q2 GDP was revised up to 3.8% (Briefing.com consensus: 3.3%) from the second estimate of 3.3%, spurred on by an upward revision to consumer spending. The GDP Price Deflator was revised up to 2.1% (Briefing.com consensus: 2.0%) from the second estimate of 2.0%.
  • The key takeaway from the report is that the consumer and the economy in aggregate were still operating in a solid state in Q2. Real final sales to private domestic purchasers were up 2.9% versus 1.9% in the second estimate.
• Weekly initial jobless claims for the week ending September 20 decreased by 14,000 to 218,000 (Briefing.com consensus: 238,000), while continuing jobless claims for the week ending September 13 decreased by 2,000 to 1.926 million.
  • The key takeaway from the report is the recognition that initial jobless claims—a leading indicator—are running at levels more consistent with a strong labor market than a weak one. If nothing else, there certainly wasn't a lot of firing activity in the week ending September 20.
• Durable goods orders increased 2.9% month-over-month in August (Briefing.com consensus: -0.5%) following an upwardly revised 2.7% decline (from -2.8%) in July. Excluding transportation, durable goods orders rose 0.4% month-over-month (Briefing.com consensus: -0.1%) following a downwardly revised 1.0% increase (from 1.1%) in July.
  • The key takeaway from the report is the nondefense capital good orders, excluding aircraft—a proxy for business spending—jumped 0.6% on the heels of a 0.8% increase in July.
• The Advance International Trade in Goods deficit narrowed to $85.5 billion from an upwardly revised $102.8 billion (from -$103.6 billion) in July. Advance Retail Inventories were flat following a downwardly revised 0.1% increase (from 0.2%) in July, and Advance Wholesale Inventories were down 0.2% following a downwardly revised unchanged reading (from 0.2%) in July.
  • The key takeaway from the report is that it had tariff policies written on it, evidenced by the fact that imports were $19.6 billion less than July imports, while exports were $2.3 billion less than July exports.
•  Yield Check:
  • 2-yr: +5 bps to 3.65%
  • 3-yr: +6 bps to 3.66%
  • 5-yr: +6 bps to 3.77%
  • 10-yr: +4 bps to 4.18%
  • 30-yr: +1 bp to 4.76%