US Bond Yields dip despite strong flash PMI data

Notable figures in the US bond market, Bill Ackman and Bill Gross, expressed optimism about US bonds on Monday. Ackman revealed he had covered his bond shorts due to his belief that the US economy is slowing faster than recent data indicates. He emphasized the perceived risk in remaining short on bonds at current long-term rates. Bill Gross echoed this sentiment, asserting that the previous notion of "higher for longer" is outdated and predicted a US recession in the fourth quarter.

On Tuesday, the S&P Global Flash US Purchasing Managers Indices (PMIs) for the current month were released, revealing a surprising three-month high of 51 in the Flash Composite PMI, indicating expansion. Chris Williamson, chief business economist at S&P Global Market Intelligence, highlighted the positive turn in US output growth and elevated future output expectations. However, he cautioned that the selling price gauge nearing its pre-pandemic long-run average suggests a potential soft landing.

Despite the better-than-expected PMI data, US bond yields experienced a retreat on Tuesday. The markets may be interpreting the PMI figures with caution, as they might seem too good to be true. Alternatively, renewed hopes for a soft landing could be contributing to the decline in yields and the uptick in equities.