Bond markets continue to see support despite higher than expected May PCE

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Published Date 6/27/2025

Prior to 8:30 am ET data this morning the 10 year note yield traded at 4.27% +3 bps from yesterday’s decline of 5 bps; MBS prices prior to 8:30 am -7 bps.

At 8:30 am key inflation data. May personal consumption expenditures, PCE, edged slightly higher than estimates. Month/month overall PCE expected +0.1% reported +0.1% and unchanged from April, year/year overall thought to be +2.3% reported at 2.3% up from 2.2% in April. Core month/month thought to be +0.1% increased to +0.2%, year/year core +2.7% against estimates of 2.6% and April revised from 2.5% to 2.6%.

Also at 8:30 am, May personal income and spending, both weaker than forecasts. Income expected +0.3% declined -0.4%, spending expected +0.2% dropped to -0.1%. April income revised from +0.8% to +0.7%. Income decreased for the first time since Sept 2021. Employee compensation rose by 0.4% in May, the same pace as in April, amid increases in both wages (0.4%) and supplement to wages (0.5%). Spending fell for goods (-0.1% versus 0.2% in April), amid a sharp decline in durable goods (-1.8% versus 0.4%) and a softer drop for non-durable goods (-0.2% versus 0%). In turn, spending in services rose at a softer pace (0.1% versus 0.2%).

The initial reaction to the 8:30 am data was muted, the 10 year note at 9 am 4.27% +3 bps as it was prior to 8:30 am; MBS prices at 9 am -11 bps also unchanged from before 8:30 am.

At 9:30 am the DJIA opened +175, NASDAQ +62, S&P +16. 10 year note 4.29% +5 bps. FNMA 6.0 30 year coupon at 9:30 am -19 bps from yesterday’s close and +1 bp from 9:30 am yesterday.

At 10 am the final University of Michigan June consumer sentiment index. Expected at 60.5 increased to 60.7.

The S&P and NASDAQ made new highs this morning as the bull markets roar ahead. Investors increasingly discount the economic threat posed by the trade war and Middle East instability. A trade deal with China has been inked according to Trump and Chinese representatives on rare earth imports. Commerce Secretary Howard Lutnick says the U.S. is nearing agreements with 10 other trading partners. Treasury Secretary Scott Bessent said, implying that the administration isn't holding to the July 9 deadline.

Source: TBWS

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