Lower-than-expected numbers in this week's Purchasing Managers Index (PMI) could drive 10-year Treasury yields back down below the psychologically important 4% barrier, according to Josh Stiles, bond strategist at IDEAglobal. The yield on the benchmark note dipped below the threshold last Wednesday before rising back above 4% on Thursday.
Consensus opinion on the September PMI has it declining from August's 59 reading to 58.3, which would mark the third-straight month the PMI has declined. A reading greater than 50 indicates growth in the manufacturing sector.
Stiles said a weak PMI coupled with lower-than-expected employment numbers could drive 10-year Treasury yields down to 3.9% or 3.8%. That being said, his firm calls for a stronger PMI of 60 and payroll numbers above 150,000, which could push the yield to 4.20% or 4.25%.
As for other firms, Lehman Brothers expects the PMI will drop to 57.5, according to Ethan Harris, managing director and chief U.S. economist. J.P. Morgan predicts the PMI will stay at 59, according to Jim Glassman, senior economist.
The PMI is compiled from a monthly survey of purchasing executives at 400 manufacturing companies and is seen as an indicator of economic growth.
