Bond Market Update

Data Recon

• Personal income increased 0.7% month-over-month in May (Briefing.com consensus: 0.3%) after being unchanged in April. Personal spending also rose 0.7% month-over-month (Briefing.com consensus 0.3%) following a downwardly revised 0.4% increase (from 0.5%) in April. The PCE Price Index was up 0.4%, as expected, and up 4.1% year-over-year versus 3.8% in April. The core PCE Price index, which excludes food and energy, increased 0.3%, also as expected, and was up 3.4% year-over-year versus 3.3% in April.
  • The key takeaway from the report is that, first, there weren't any headline shocks for the PCE price indexes. They were in line with expectations, allowing participants to assume that next month's readings will look better given the sharp decline in oil prices. Secondly, real PCE was up 0.3% month-over-month, demonstrating that spending was driven by increased demand and not just higher prices. This will be a nice input for Q2 GDP forecasts.
• Q1 GDP was revised up to 2.1% (Briefing.com consensus: 1.6%) from the second estimate of 1.6%. The GDP Price Deflator was bumped up to 3.6% (Briefing.com consensus: 3.5%) from the second estimate of 3.5%.
  • The key takeaway from the report is that Q1 GDP was stronger than originally thought, due primarily to a downward revision to imports, which are a subtraction in GDP calculations.
• Initial jobless claims for the week ending June 20 declined by 12,000 to 215,000 (Briefing.com consensus: 225,000), while continuing jobless claims for the week ending June 13 increased by 21,000 to 1.821 million.
  • The key takeaway from the report is that initial jobless claims continue to track at low levels, offering a nice cue that suggests the labor market, overall, remains on solid ground.
• Durable goods orders declined 4.5% month-over-month in May (Briefing.com consensus: -3.2%) following an upwardly revised 8.5% increase (from 7.9%) in April. Excluding transportation, durable goods orders were up a sturdy 1.3% month-over-month (Briefing.com consensus: 0.5%) following an upwardly revised 1.4% increase (from 1.1%) in April.
  • The key takeaway from the report is that there was a healthy pickup in business spending in May, evidenced by the 1.6% increase in new orders for nondefense capital goods excluding aircraft.
• Yield Check:
  • 2-yr: -2 bps to 4.12%
  • 3-yr: -2 bps to 4.12%
  • 5-yr: -2 bps to 4.16%
  • 10-yr: -2 bps to 4.38%
  • 30-yr: -2 bps to 4.84%