Bond Market Update

Data Recon

• The ISM Manufacturing Index hit 54.0% in May (Briefing.com consensus 53.1%), up from 52.7% in April. The dividing line between expansion and contraction is 50.0%, so the May figure suggests an acceleration in the rate of change in manufacturing activity compared to April.
  • The key takeaway from the report is that it continued showing some stagflationary elements for the second consecutive month, as employment remained in contraction—though at a slower rate—while the prices index only dipped slightly from its sharpest increase since early 2022.
• Construction spending increased 0.4% month-over-month in April (Briefing.com consensus 0.3%) after increasing a revised 0.2% (from 0.6%) in March. On a year-over-year basis, construction spending was up 0.9%.
  • The key takeaway from the report is that it included a sharp downward revision to growth rate from March (0.2%), resulting in a weak report overall. New single-family construction spending increased a solid 1.4% in April but was still down 2.9% year-over-year.
• Yield Check:
  • 2-yr: +8 bps to 4.09%
  • 3-yr: +8 bps to 4.14%
  • 5-yr: +8 bps to 4.23%
  • 10-yr: +6 bps to 4.51%
  • 30-yr: +3 bps to 5.03%