Bond Market Update

Data Recon

• Total construction spending decreased 0.4% month-over-month in April (Briefing.com consensus 0.1%) after a downwardly revised 0.8% decline (from -0.5%) in March. Total private construction was down 0.7% month-over-month, while total public construction was up 0.4% month-over-month. On a year-over-year basis, total construction spending was down 0.5%.
  • The key takeaway from the report is that residential spending weakened noticeably with a downturn in new single-family construction.
    • Total residential spending decreased 0.9% month-over-month, while nonresidential spending fell 0.1% month-over-month.
    • In private construction, residential spending dropped 0.9%, with new single-family construction down 1.1% and multifamily construction down 0.1%. Nonresidential spending declined 0.5%, led by a 1.0% decline in commercial spending and a 0.7% drop in power spending.
    • In public construction, nonresidential spending rose 0.5% month-over-month, led by a 0.5% increase in highway and street spending.
• The May ISM Manufacturing Index slipped to 48.5% in May (Briefing.com consensus 49.0%) from 48.7% in April. The dividing line between expansion and contraction is 50.0%, so the May reading suggests that activity in the manufacturing sector contracted at a slightly faster pace than the prior month.
  • The key takeaway from the report is that manufacturing sector activity was hampered in May by tariff uncertainty.
    • The New Orders Index rose to 47.6% from 47.2% in April.
    • The Production Index jumped to 45.4% from 44.0% in April.
    • The Prices Index edged dipped to 69.4% from 69.8% in April.
    • The Employment Index increased to 46.8% from 46.5% in April.
    • The Backlog of Orders Index improved to 47.1% from 43.7% in April.
    • The Supplier Deliveries Index increased to 56.1% from 55.2% in April.
    • The New Export Orders Index dropped to 40.1% from 43.1% in April. Excluding COVID-19, this is the lowest reading since March 2009.
• Yield check:
  • 2-yr: -1 bp to 3.91%
  • 3-yr: -1 bp to 3.87%
  • 5-yr: unch at 3.98%
  • 10-yr: unch at 4.42%
  • 30-yr: +2 bps to 4.96%