Bond Market Update

Data Recon

• Longer-dated Treasury yields went back to test overnight highs, with some generally solid economic data helping to catalyze the move. They have started to back off again a bit, but an elevated reading for the Prices Paid Index in the September ISM Manufacturing Index has been a sticking point for ongoing nflaiton concerns.
• September S&P Global U.S. Manufacturing PMI - Final (Actual 55.9; Briefing.com consensus: 55.3; prior 57.0)
• For the week ending September 26, initial jobless claims fell by 1,000 to 197,000 (Briefing.com consensus: 200,000). Continuing jobless claims for the week ending September 19 decreased by 11,000 to 1.701 million.
  • The key takeaway from the report remains the same: layoff activity continues to run at low levels that reflect a solid demand environment.
• Construction spending increased 0.9% month-over-month in August (Briefing.com consensus: 0.3%) following a 0.1% decline in July. On a year-over-year basis, construction spending was down 1.7%.
  • The key takeaway from the report was the strength seen in private construction, which included solid increases for both residential and nonresidential spending.
• The ISM Manufacturing Index decreased to 54.5% in September (Briefing.com consensus: 55.2%) from 54.6% in August. The dividing line between expansion and contraction is 50.0%, so the September figure suggests manufacturing activity expanded in September from the prior month but at a slightly slower pace.
  • The key takeaway from the report is that it showed an ongoing expansion in manufacturing activity that was accompanied by a faster acceleration in prices paid, which will continue to foment concerns about pass-through effects for customers.
• Yield check:
  • 2-yr: -4 bps to 4.85%
  • 3-yr: -2 bps to 4.98%
  • 5-yr: -1 bp to 5.08%
  • 10-yr: +2 bps to 5.32%
  • 30-yr: +2 bps to 5.66%