Bond Market Update

Data Recon

• The August Personal Income and Spending report showed income up 0.2% month-over-month (Briefing.com consensus: 0.4%), spending up 0.9% (Briefing.com consensus: 0.7%), the PCE Price Index up 0.3% (Briefing.com consensus: 0.4%), and the core PCE Price Index up 0.2% (Briefing.com consensus: 0.3%). On a year-over-year basis, the PCE Price Index was up 3.4%, unchanged from July, which was revised down from 3.7%; and the core PCE Price Index was up 3.0%, also unchanged from July, which was revised down from 3.3%.
  • The key takeaway, though, is that PCE inflation, no matter how you slice it, is still far above the Fed's 2.0% inflation target, so the idea that the Fed may raise rates again before the end of the year is bound to remain a lively one. Another important takeaway is that spending outpaced income growth, which contributed to the decline in the personal savings rate.
• The third estimate for Q2 2026 showed real GDP increased 2.2% (Briefing.com consensus: 1.5%) versus the previous estimate of 1.5%. The GDP deflator increased 6.1% (Briefing.com consensus: 6.3%) versus the the previous estimate of 6.4%.
  • The key takeaway from the report is that private domestic demand strengthened materially and provided a firm underlying growth signal, even as consumer price inflation remained elevated.
• The September ADP Employment Change report showed private-sector employment increasing by 90,000 (Briefing.com consensus: 58,000).
• The Advance International Trade in Goods deficit widened to $132.6 billion in August from a downwardly revised deficit of $118.9 billion (from -$118.8 billion) in July. Advance Retail Inventories increased 0.3%, while Advance Wholesale Inventories rose 0.7%.
• Yield check:
  • 2-yr: -5 bps to 4.84%
  • 3-yr: -4 bps to 4.95%
  • 5-yr: -3 bps to 5.03%
  • 10-yr: -2 bps to 5.24%
  • 30-yr: unch at 5.59%