Bond Market Update

Data Recon

• The ISM Services PMI increased to 54.5% in May (Briefing.com consensus: 53.6%) from 53.6% in April. The dividing line between expansion and contraction is 50.0%, so the May reading reflects services sector activity growing at a faster pace than the prior month.
  • The key takeaway from the report is the understanding that activity for the country's largest business sector picked up pace in May, notwithstanding higher prices that were reflected in the highest average 12-month reading (68%) since April 2023.
• Factory orders increased 4.8% month-over-month in April (Briefing.com consensus: 3.5%) following an upwardly revised 1.8% increase (from 1.5%) in March. Excluding transportation, factory orders increased 1.3% on the heels of a 1.8% increase in March. Shipments of manufactured goods were up 1.0% after increasing 1.5% in March.
  • The key takeaway from the report is that the headline numbers masked a weak month for business spending, evidenced by the 1.0% decline in nondefense capital goods orders, excluding aircraft. To be fair, that decline followed a very strong 3.8% increase in March, so it could just be a natural pullback after a large increase.
• May Final S&P Global Services PMI 50.7% versus 50.9% prior.
• Yield check:
  • 2-yr: +2 bps to 4.07%
  • 3-yr: +2 bps to 4.12%
  • 5-yr: +2 bps to 4.20%
  • 10-yr: +2 bps to 4.47%
  • 30-yr: +1 bp to 4.98%