May Data Starts to Bloom

  • The May ISM Manufacturing Index is due at 10am ET and is expected at 54.5 vs. 55.4. The series has been softening of late, reaching a cycle high of 63.7 in March of 2021 but trending south since then. It’s still, however, above the 50 mark which divides an expanding sector from a declining one.


  • The prices paid component in the report is expected to edge lower which will be another indicator, if it comes as expected, showing that price pressures, while still high, are starting move lower. The employment component is expected to tick higher to 52.0 from 50.9 in April, indicating manufacturing employment is managing to  expand, albeit at a slow pace.


  • Another report this morning, Job Openings and Labor Turnover Survey, is expected to show April job openings remain strong with 11.35 million expected compared to 11.549 million in March. Recall the latest jobs report showed 5.95 million people unemployed, so nearly a 2-1 in openings vs. unemployed.


  • We had mentioned before that this figure may be the canary-in-the-coalmine as it relates to how the job market is faring with the Fed rate hikes. If companies start to see demand slow, they may reduce job openings before moving to the next step of layoffs. With the noted lag of monetary policy to the actual economy it’s still too early to expect a major slide in the April job opening figure but keep an eye on it as we move through the summer.


  • Another report already out this morning has mortgage applications falling 2.3% for the week after falling 1.2% the prior week. Purchase apps (-0.6%) and refi apps (-5.4%) both fell despite the average 30-year mortgage rate ticking lower to 5.33% vs. 5.46% the prior week. Mortgage activity is down about 51.6% from a year ago which shows you the impact of higher rates over the past year. This reduced supply of new bonds should work to keep prices higher than otherwise as the Fed embarks on its QT program.


  • Treasury prices are a tad lower to unchanged across the curve this morning as equity futures are nosing higher in fairly quiet trading. Oil is trading a touch higher which could also be adding a little inflation-related pressure on Treasuries.


Job Openings vs. Unemployed Workers

Source: Bloomberg


Agency Indications — FNMA / FHLMC Callable Rates

Maturity (yrs) 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year
0.25 2.61 2.83 2.96 3.14 3.39 3.85
0.50 2.59 2.81 2.90 3.02 3.25 3.74
1.00 2.59 2.77 2.87 2.98 3.16 3.62
2.00 2.76 2.81 2.90 3.05 NA
3.00 2.85 2.98 NA
4.00 2.94 NA
5.00 2.90 NA
10.00 NA

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Published: 06/01/22 Author: Thomas R. Fitzgerald