Bond Market Update

Data Recon

• Total PPI decreased 0.3% month-over-month in June (Briefing.com consensus: 0.1%) following a downwardly revised 0.6% increase (from 1.1%) in May. The June drop was driven by a 1.4% decline in prices for final demand goods, which was paced by a 6.4% decline in prices for final demand energy. Core PPI, which excludes food and energy, was up 0.2% month-over-month (Briefing.com consensus: 0.4%) following a downwardly revised 0.1% increase (from 0.4%) in May. On a year-over-year basis, total PPI was up 5.5% versus 6.0% in May, and core PPI was up 4.7% versus 4.6% in May.
  • The key takeaway from the report is that it is an encouraging monthly marker of how the inflation data can improve with a decline in energy prices; however, it also reveals on a year-over-year basis that wholesalers are still dealing with high prices. Net-net, this report conveys the need for more improvement in bringing down wholesale prices, but it was better-than-feared when also factoring in the downward revisions to the prior month.
• July Empire Manufacturing 15.6 (prior 5.7), with the new orders index up 18.7 points to 22.2 and the prices paid index down 8.7 points to 52.3.
• Yield check:
  • 2-yr: -4 bps to 4.15%
  • 3-yr: -4 bps to 4.20%
  • 5-yr: -4 bps to 4.28%
  • 10-yr: -3 bps to 4.56%
  • 30-yr: unch at 5.09%