What Is the Message From the Bond Market?

Treasury market rallies amid weak growth prospects

Highlights

• Treasury market rallies amid weak growth prospects

• Consumers push back on higher prices as excess savings vanish

• April’s PCE report was encouraging for our disinflation call

• We are left with only a handful of items driving inflation

While We Were Sleeping

Well, the Treasury market seems to be seeing something. And it’s the furthest thing from 2021 and 2022. It isn’t every day that we see a -11 basis point plunge on a day when nothing major happened and on a day bereft of any Fedspeak. The ISM manufacturing PMI wasn’t pretty, and construction spending edged down instead of rebounding as was widely expected. These are second-tier data releases, but they did extend the string of subpar economic reports, not to mention the pattern of negative revisions we saw in 2000 and again in 2007.