U.S. bond yields pare gains after ISM manufacturing PMI data; 10-year Treasury yield last flat at 4.422%.

U.S. bond yields pare gains after ISM manufacturing PMI data; 10-year Treasury yield last flat at 4.422%.

U.S. bond yields have moderated following the release of the Institute of Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) report, which revealed a further contraction in the manufacturing sector. The 10-year Treasury yield, which had surged to above 4.5% on Friday, remained flat at 4.422% on Tuesday, June 2, 2025 [1].

The ISM Manufacturing PMI report, released on May 2, 2025, showed a PMI of 48.5, a slight decline from the previous month's figure of 48.7. This reading fell short of the forecasted 49.3, indicating a more pronounced slowdown in the manufacturing sector than anticipated by economists. The report also highlighted a decline in new orders, production, employment, supplier deliveries, and inventories, while prices continued to increase [2].

The U.S. bond market experienced a sharp selloff in recent weeks, with yields rising more than 50 basis points since mid-February. This selloff was driven by escalating trade tensions, mounting concerns over the U.S. economic outlook, and fears of a recession and high inflation. The Chinese finance ministry announced that it would raise tariffs on U.S. imports to 125%, in response to Washington's tariffs of up to 145% on Chinese goods [1].

Goldman Sachs analysts noted that while the recent 2% gain in the S&P 500 was driven by trade-related legal developments, investor focus is now shifting to the potential risks posed by rising bond yields. The firm expects the 10-year U.S. Treasury yield to end 2025 at 4.5% and rise slightly to 4.55% in 2026. However, the firm emphasized that the cause and pace of rising yields are more critical to equities than the absolute level [3].

The ISM Manufacturing PMI data has exerted downward pressure on the U.S. dollar, as it suggests a slowdown in the manufacturing sector, which is a significant component of the overall economy. Economists and investors will be closely watching upcoming reports for signs of a turnaround or further slowdown in the manufacturing sector [2].

References:
[1] https://tradingeconomics.com/united-states/government-bond-yield
[2] https://www.investing.com/news/economic-indicators/ism-manufacturing-pmi-dips-further-undershooting-forecast-93CH-4076064
[3] https://finance.yahoo.com/news/real-risk-stocks-elevated-bond-133140680.html