GERMANY: Bundesbank Projections Contain No Noteworthy Second-Round Effects

Tsy futures trade modestly weaker ahead of the $25B 30Y Bond auction (912810UU0) at 1300ET. WI currently running around 5.044%, 17.3bp cheap to last month's stop. Today's results will be available shortly after the competitive auctions closes at 1300ET.

• April auction recap: Treasury futures off session lows (USM6 -8 at 114-17) after the $22B 30Y auction re-open (912810UR7) stopped through: 4.871% high yield vs. 4.878% WI; bid-to-cover at 2.45x vs. 2.66x prior.
  • Peripheral measures: indirect take-up receded to 63.41% vs. 69.94% prior; direct bidder take-up rose to 27.23% vs. 24.18% prior; while primary dealer take-up rises to 9.36% vs. 5.88% prior.

• US Data/Speaker Calendar (prior, estimate). All times ET
• 05/14 0800 Fed Gov Miran Bloomberg TV
• 05/14 0830 Import Price Index MoM (0.8%, 1.0%), YoY (2.1%, 3.0%)
• 05/14 0830 Export Price Index MoM (1.6%, 1.1%), YoY (5.6%, 6.6%)
• 05/14 0830 Initial Jobless Claims (200k, 205k), Continuing Claims (1.766M, 1.78M)
• 05/14 0830 Retail Sales Advance MoM (1.7%, 0.5%), Control Group (0.7%, 0.4%)
• 05/14 1000 Business Inventories (0.4%, 0.9%)
• 05/14 1015 KC Fed Schmid on Payments Innovation
• 05/14 1130 US Tsy $100B 4W & $95B 8W bill auctions
• 05/14 1300 Cleveland Fed Hammack opening remarks
• 05/14 1745 NY Fed Williams moderated discussion
• 05/14 1900 Fed Gov Barr on Balance Sheet, moderated Q&A
• Source: Bloomberg Finance L.P. / MNI

Boston Fed President Collins (next votes on the FOMC in 2028) continued to sound very cautious on the inflation outlook in a speech Wednesday, saying that while policy is "well positioned" the Fed can't take currently anchored inflation expectations for granted, and "I believe it will likely be important to maintain the current slightly restrictive monetary policy stance for some time". And "while it is not in my most likely outlook, I could envision a scenario in which some policy tightening is needed to ensure that inflation returns durably to 2 percent in a timely manner."

• She's become one of the more hawkish FOMC members since late last year when she began cautioning about further rate cuts; last week she said in an interview that she would have preferred that the latest FOMC Statement guidance amend the outright easing bias in favor of something more two-sided (along the lines of her 3 regional president colleagues who dissented at the April meeting).
• On inflation: "While way down from its 2023 peak, inflation has been above target for over five years – and has increased recently due to the jump in energy prices....I expect little to no reduction in inflation this year, with the disinflation process gaining more traction next year. But the likelihood of other scenarios – with higher and more persistent inflation, more adverse labor market outcomes, or both – has increased....I believe it is important to durably return inflation to the FOMC’s 2 percent target in a reasonable amount of time."
• While tariff pass-through has "stabilized recently", suggesting a waning impact ahead particularly for core goods, she takes note of elevated supercore inflation: "services inflation excluding housing prices remains above levels consistent with 2 percent inflation. I find this pattern notable because a considerable portion of the labor productivity improvements have accrued to the services sector. To me, this suggests that, with relatively solid demand, firms retain pricing power and have less incentive to fully pass efficiency gains on to consumers."
• That said, she also points out that "the positive correlation between oil shocks and future consumer price inflation, while still present, has diminished since the 1990s...the “second-round” effects of an oil shock on non-energy prices are now less pronounced than in the 1970s and 1980s... [correlations] suggest the current oil shock will likely have a modest impact on the domestic economy overall, with perhaps somewhat more adverse effects on inflation than on the labor market" though she is concerned about downside scenarios for growth and upside scenarios for inflation stemming from a potentially prolonged conflict in the Middle East.
• On growth and the labor market: "Despite a series of still-unfolding supply shocks – including tariffs in 2025 and the oil shock more recently – economic growth has remained resilient. And while the labor market has clearly softened from the overheated conditions of 2023 and 2024, the unemployment rate remains low by historical standards." She says that various indicators are "consistent with a labor market in balance" and "continued high inflation does not appear to be driven by labor market pressures".