Bond Market Update

Data Recon

• The Producer Price Index for final demand increased 0.5% month-over-month in March (Briefing.com consensus: 1.2%) following a downwardly revised 0.5% increase (from 0.7%) in February. The index for final demand, less foods and energy, rose just 0.1% (Briefing.com consensus: 0.4%) following a downwardly revised 0.3% increase (from 0.5%) in February. These changes left the index for final demand up 4.0% year-over-year, versus 3.4% in February, and the index for final demand, less foods and energy, up 3.8% year-over-year, unchanged from February.
  • The key takeaway from the report is that the inflation seen at the wholesale level in March was driven largely by energy prices and gasoline prices (+15.7%) in particular. The index for final demand services was unchanged, so the market is giving itself some latitude to look through the energy price shock as something that is temporary.
• Yield Check:
  • 2-yr: UNCH at 3.78%
  • 3-yr: UNCH at 3.80%
  • 5-yr: -1 bp to 3.91%
  • 10-yr: -1 bp to 4.29%
  • 30-yr: UNCH at 4.90%