Bond Market Update

Data Recon

• Personal income, bolstered by a 0.6% increase in wages and salaries, increased 0.4% month-over-month in July (Briefing.com consensus: 0.4%) following a 0.3% increase in June, personal spending increased 0.5% month-over-month (Briefing.com consensus: 0.5%) following an upwardly revised 0.4% increase (from 0.3%) in June, the PCE Price Index increased 0.2% month-over-month (Briefing.com consensus: 0.2%) following a 0.2% increase in June, and core PCE inflation, which excludes food and energy, increased 0.3% month-over-month (Briefing.com consensus: 0.3%) following a 0.3% increase in June. On a year-over-year basis, PCE inflation was up 2.6%, versus 2.6% in June, while core PCE inflation was up 2.9%, versus 2.8% in June. The Fed's inflation target is 2.0%.
  • The key takeaway from the report is that it was largely in line with expectations, so the market is apt to stick to its thinking that there will be a rate cut in September even though PCE inflation remains stuck above the Fed's 2.0% target.
• Yield Check:
  • 2-yr: UNCH at 3.64%
  • 3-yr: +1 bp to 3.60%
  • 5-yr: +1 bp to 3.71%
  • 10-yr: +2 bps to 4.23%
  • 30-yr: +4 bps to 4.91%