MediumIV Macro Policy & Sovereign Debt2 November 2026, Monday · 18:00 TRT (UTC+3)
US manufacturing beats forecasts as input prices stay high
The ISM manufacturing index rose from 54.5 to 55.5 in October, beating the Dow Jones consensus of 54.5. The prices component fell 2.7 points to 75.2 but remained elevated.
The production component rose 2.3 points to 59.0, its highest since November 2021 according to a CAPP Notes compilation. Inventories climbed 2.8 points to 51.4, moving out of contraction. Backlogs fell 1.8 points to 54.6 and employment slipped 0.3 points to 52.3. The index has been in expansion territory for 10 months.
September construction spending, released the same day, fell 1.9% on the month; CNBC said it was the steepest monthly drop since April 2020, against expectations of a 0.4% rise. Residential spending fell 5.5% while non-residential spending rose 0.6%. The bond market priced in the strong ISM only briefly, and the 10-year yield closed the day 3.5 basis points lower at 4.893%.
What pulled yields down was a 7.63% fall in Brent to 104.77 dollars; the sources do not specify the contract month. CNBC reported on 3 November that September JOLTS job openings rose to 7.523 million against expectations of 7.125 million. October non-farm payrolls are due on Friday 6 November.
Talay assessment
Bottom line
The October data point to output and inventory build rather than demand: production rose to 59.0 while backlogs and employment fell. A prices component at 75.2 keeps the Fed's December hike calculus alive, while the 1.9% fall in construction spending says rate-sensitive sectors are weakening. The most likely path is manufacturing that stays strong but narrowly based.
Likely effects
- Fed expectationsNegativeWeeks
A prices component holding at 75.2 shows energy-driven costs persisting for producers and supports expectations of a December hike.
- Bond yieldsUncertainWeeks
The 10-year yield falling to 4.893% despite a strong ISM shows energy prices, more than data, are setting the direction of yields for now.
- Construction and housingNegative1–6 months
A 5.5% fall in residential spending shows high rates squeezing rate-sensitive sectors, and that weakness could spill into employment.
Possibilities, ranked
- 1Strong but narrow55%
Output stays high, backlogs and employment move sideways and price pressure eases slowly.
Watch: Backlog and employment components of the November ISM
- 2Price pressure spreads30%
Input costs pass through to final prices and the Fed finds further data to justify a December hike.
Watch: The ISM prices component returning above 75.2, and October CPI
- 3Inventory cycle reverses15%
The inventory build finds no matching demand and the production component falls quickly.
Watch: The inventories component dropping back below 50
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- ISM manufacturing▲ 55.5
- ISM prices▼ 75.2
- Construction spending▼ −1.9%
- US 10-year▼ 4.893%
Historical context
US 10-year yield, last 6 months
- 117/09 · Fed dot plot median for 2026 rises to 4.00-4.25% while the 10-year yield eases from 5.04% to 4.94%
- 221/09 · The Fed's Goolsbee: if inflation is coming from demand, the rate response will be sharper and front-loaded
- 323/09 · US Treasury sells $70 billion of 5-year notes at 5.033%; after hot PMIs the 10-year yield hits 5.10%, its highest since 2007
- 424/09 · India's Sensex falls 1,247.71 points to 73,580; rupee presses against the 96 threshold as Brent tops $102 and the US 10-year yield exceeds 5.11%
- 524/09 · US Treasury sells 44 billion dollars of 7-year notes at 5.085%: highest yield since April 1993 as indirect demand falls to 57.2%
- 624/09 · No joint statement at Xi–Trump summit: tariff truce extended by just 2 months from 10 November to 10 January, no new decisions on chips or rare earths
- 725/09 · Michigan consumer sentiment at a 4-month low of 48.1, 1-year inflation expectations jump to 4.6%; US 30-year yield rises to 5.50%
- 827/09 · Bessent urges Fed flexibility on rates, citing AI productivity
- 928/09 · US ten-year Treasury yield climbs to a 19-year high
- 1029/09 · US long-dated yield holds above 5.5% despite Treasury buybacks
- 1130/09 · Softer US inflation erodes the odds of an October rate rise
- 1201/10 · US Treasuries pull back from their peak as two-year yield drops 10 basis points
- 1302/10 · Logan seeks 50 more basis points while most of the Fed waits
- 1405/10 · Nasdaq hits record as Treasury yields touch 24-year high
- 1506/10 · Fed's Schmid and Daly keep the door open to hikes despite high yields
- 1607/10 · Fed minutes point to one more rate rise before year-end
- 1707/10 · US ten-year auction clears at the highest yield in a quarter-century
- 1814/10 · US inflation climbs to 3.7%, putting an October hike back in play
- 1915/10 · US producer inflation jumps to 6.3%, yet Treasury yields fall
- 2016/10 · Warsh gives no rate signal in Bangkok and October hike odds fall
- 2119/10 · Barclays now expects Fed hikes in both December and January
- 2220/10 · US pending home sales sink to their lowest since 2001
- 2320/10 · Thirty-year Treasury yield slips below the 20-year point
- 2422/10 · US 10-year yield slips below 5% as tech sell-off deepens
- 2523/10 · US firms raise selling prices at fastest pace since 2022
- 2624/10 · Fed expected to hold on Wednesday as markets price a December hike
- 2727/10 · Domestic buyers displaced foreigners at the US two-year auction