ISM Prices Paid Falls

Tsys holding narrow range, near session highs for the last few hours, decent volumes (TYU >1.18M), curves flatter with short end underperforming: 2s10s -31.676 inverted low just off last week's 22Y low of -32.142.

• Data headwinds: The US ISM Manufacturing PMI edged down a modest 0.2pp to 52.8 in July, but stronger than the forecast of 52.0. Read is lowest since June 2020 and the second consecutive month of decline. Metric remains in expansive territory above the 50-point threshold.
• Substantial fall was seen in the prices paid index: -18.5 points to 60.0, the lowest since Aug'20. This is a much slower price growth. Volatility in commodity markets underscores this steep decline, with a significant 21.5% of respondents paying less in July (compared to June).
• Meanwhile, June construction spending declined -1.1% vs. +0.1% estimate, carry-over slowdown in economic data from last week a headwind for more aggressive Fed pricing at the Sep 21 FOMC.
• First-half block buys in 5s helped kick off the early bid, preceded duration neutral 5s30s flattener (-12,000 FVU 113-20 vs. +3,300 USU 144-10.)
• Limited data on tap for Tuesday: JOLTS Job Openings (10.994M est) and vehicle sales throughout the day. Larger focus on Friday's July employment data (+250k est vs. +372k prior).
• Cross assets: spot Gold +4.75 at 1770.69, Crude weaker: WTI -4.49 at 94.13, stocks mildly weaker ESU2 -10.50 at 4122.75.
• Currently, 2-Yr yield is up 1.6bps at 2.9005%, 5-Yr is down 1.7bps at 2.6592%, 10-Yr is down 5.4bps at 2.5947%, and 30-Yr is down 9.2bps at 2.9175%