PMI Day | US Treasury Yields Set for Worst Decline in Decade
Published June 3, 2019
The US ISM manufacturing sector data signaled a slightly deflated position in May. The headline PMI fell to its lowest level since 2009 as output growth eased and new orders shrunk for the first time. Weak demand conditions and the ongoing trade war with China has led corporations to express the lowest degree of confidence regarding future output growth since measurable data has been available.
Canada’s manufacturing sector had a noticeable drop in operating conditions in May. Production continued to contract amongst the steepest drop in new orders since 2015. However, employment saw a minuscule increase after a dip in April, whilst input price inflation eased to its slowest rate in years.
The United Kingdom’s manufacturing sector unpredictably contracted in May for the first time since the 2016 Brexit referendum. IHS Markit’s manufacturing PMI dropped to 49.4 from 53.1 in April as factories unwound Brexit provisions when the deadline date was pushed back to October 31 of 2019.
Market participants are pushing bond yields lower as many hold the belief that the Federal Reserve will be forced to cut borrowing costs to contain the effects of US-Chinese trade tensions. Yields on two-year US treasuries dropped eight basis points to 1.84%, the lowest since 2017. 10-year US treasury notes fell five basis points to 2.07%. Yields on two-year treasuries are headed for the biggest two-day decline since 2008 after China extended retaliatory tariffs to cover more than two-thirds of imports from the US.