Bond Market Update

Data Recon

• The August ISM Manufacturing Index checked in at 48.7% for August (Briefing.com consensus: 48.6%), up from 48.0% in July. The dividing line between expansion and contraction is 50.0%, so the August figure suggests manufacturing activity contracted at a slower pace than the prior month.
  • The key takeaway from the report is that the new orders index bounced back into expansion territory following six straight months of contraction; however, the overall activity for the manufacturing sector remains in a disappointing mode of contraction.
• Total construction spending decreased 0.1% month-over-month in July (Briefing.com consensus: 0.2%) following a 0.4% decline in June. Total private construction was down 0.2% month-over-month, while total public construction was up 0.3% month-over-month.
  • On a year-over-year basis, total construction spending was down 2.8%. The key takeaway from the report is that the softness in July was led by private nonresidential spending, although private residential spending (+0.1%) wasn't exactly strong either.
• Yield Check:
  • 2-yr: +2 bps to 3.64%
  • 3-yr: +2 bps to 3.61%
  • 5-yr: +3 bps to 3.73%
  • 10-yr: +4 bps to 4.27%
  • 30-yr: +4 bps to 4.96%