US OUTLOOK/OPINION: Atlanta Fed Q2 GDPNow Pulls Back On Construction, ISM Mfg
May-01 15:51
The Atlanta Fed's GDPNow estimate for Q2 has dropped sharply to 1.1% Q/Q SAAR from the initial estimate of 2.4% (-0.3% in Q1).
- As we'd pointed out, today's March construction spending report looked weak and of course the April ISM Manufacturing was contractionary, and the latest nowcast reflects relevant downgrades across categories including sharply negative nonresidential and residential investment.
- See graphic from the GDPNow report:
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STIR: SOFR Implied Terminal Yield Lowest Since October
Apr-01 15:50
- Fed Funds implied rates sit within the day’s range having pared some of the day’s decline seen after soft new orders and employment details of ISM mfg (tempered by strong prices paid) and lower than expected JOLTS openings.
- Cumulative cuts from 4.33% effective: 5.5bp May, 21bp Jun, 37.5bp Jul and 78.5bp Dec.
- The 78.5bps of cumulative cuts priced for 2025 is within the day’s 75-80bps range (80bp seen both pre- and post-1000ET data) but that 5bp range is relatively tight by recent day standards.
- US rates see sizeable outperformance to European peers today, with the SFRZ6 7.5 ticks richer vs 3 ticks for Euribor.
- It sees the SOFR implied terminal yield at 3.36%, only 2bp higher than post-data fresh lows since the November presidential election and indeed since Oct 2024, as negative growth concerns are seen on balance to outweigh the inflation angle ahead of tomorrow’s reciprocal tariff announcements.
US DATA: Texas Services Sector Activity Pulls Back Sharply, But Prices Contained
Apr-01 15:33
Dallas Fed's Texas Service Sector Outlook Survey general business activity index collapsed to a 16-month low -11.3 in March from positive 4.6 prior. This is just 3 months after a 33-month high 10.8 and mirrors other regional Fed surveys that have seen a sharp deterioration over the past couple of months.
- The outlook is deteriorating as well, with the future general business activity index falling to -1.1 from positive 12.3, down over 32 points in just 2 months. "Other future service-sector activity indexes such as employment and capital expenditures also fell but remained in positive territory, reflecting expectations for slower growth in the next six months."
- One contrast with other regional services surveys though: price pressures diminished. Current prices paid dipped 1 point to 27.0, reversing February's rise, with prices received at a 4-month low 5.2 (7.9 prior).
- That said, there were multiple anecdotes included with the survey that suggested that higher tariffs could impact pricing in future - though the outlook was uncertain at this stage.
FED: US TSY 14D AUCTION: HIGH RATE 4.250%; 96.51% AT HIGH
Apr-01 15:32
- US TSY 14D AUCTION: HIGH RATE 4.250%; 96.51% AT HIGH
- US TSY 14D BILL AUCTION: DEALERS TAKE 31.07% OF COMPETITIVES
- US TSY 14D BILL AUCTION: DIRECTS TAKE 4.11% OF COMPETITIVES
- US TSY 14D BILL AUCTION: INDIRECTS TAKE 64.82% OF COMPETITIVES
- US TSY 14D AUCTION: BID/COVER 3.43
