EM CEEMEA CREDIT: CEEMEA EM Credit Market Wrap

The Dallas Fed's Texas Manufacturing Survey for April was the weakest since the start of the Covid pandemic in 2020, as tariff uncertainty weighed heavily on manufacturers in the district while price pressures remained elevated.

• The headline general activity index printed -35.8 (vs -17.0 survey, and lowest since May 2020), was a 19.5 point drop from March and a 50 point drop since January.
• That being said, actual factory activity continued to rise, with the production index at 5.1, indicating "modest growth", though shipments went negative for the first time this year.
• Most of the damage was in "perceptions of broader business conditions", which "continued to worsen notably in April", per the report. New orders collapsed 19.9 points to -20, a 28-month low. And expectations also deteriorated: the index of production 6 months ahead dropped 12.8 points to 14.8, a 16-month low.
• Summarizing the headline activity findings in the report: "The company outlook index also retreated to a postpandemic low...outlook uncertainty index pushed up...Labor market measures suggested a slight decrease in head counts and shorter workweeks this month...Most other indexes of future manufacturing activity remained positive but slipped further below average."
• Anecdotes by manufacturers unsurprisingly cited tariff uncertainty, but also noted federal government spending cuts and restrictive monetary policy as factors (link to commentary here).
• And price pressures remained acute: prices paid rose over 10 points to 48.4, highest since June 2022, with prices received up 8.6 points to 14.9 - just a 10-month high and suggestive of a continued contraction in margins. Forward-looking indicators were a little more benign, with 6-month expected prices paid ticking back 5.6 points to 47.6 (albeit from 3+ year highs in Feb/Mar), and though expected prices received ticked up 2 points to 29.6, this was well below the 34-month high 42.0 in February.
• A set of special questions in the report showed that while 48% of respondents showed "no change" in firms' ability to pass price increases onto customers, 40+% found it "somewhat/much harder" to do so (just 13.5% somewhat/much easier).
• 74.3% said they expected tariffs to impact their business negatively this year (when "don't know" respondents were excluded; 59% when they were included). A majority of the "negative" respondents said they were planning on passing cost increases onto customers (and the vast majority of them planned to increase prices within 3 months), 44% said they would absorb cost increases internally, while 29% would find new domestic suppliers and just 5.5% sought to relocate production to the US.

• No obvious headline driver or block/cross (as yet) to point to for latest bid in Tsys off morning lows.
• Tsy Jun'25 10Y climbed to 111-23 (+6.5), gains are considered corrective and resistance to watch is 111-25, 50.0% of the Apr 7 - 11 bear leg sell-off. Clearance of this level would undermine the bearish theme, and open 112.12, the 61.8% retracement point.
• Curves bull steepening with short end rates leading: 2s10s +2.650 at 50.975 (46.905 low), 5s30s +.916 at 85.004.

White House Press Secretary Karoline Leavitt has said that US President Donald Trump is not content with the temporary Victory Day ceasefire offered in Ukraine by Russian President Vladimir Putin. Leavitt says that Trump wants to see a permanent ceasefire, and that the commander-in-chief is "increasingly frustrated" with both Putin and Ukrainian President Volodymyr Zelenskyy for failing to come to the negotiating table. 

• Earlier today, Putin announced there would be a ceasefire implemented from 8-11 May in celebration of the 80th anniversary of the end of the Second World War. The Kremlin has threatened to retaliate with "an adequate and effective response" should Ukraine break the ceasefire.
• The meeting between Trump and Zelesnkyy in St. Peter's Basilica at the funeral of Pope Francis over the weekend, combined with rhetoric saying Putin "has to be dealt with differently, through 'Banking' or 'Secondary Sanctions?'
• In a further sign of concessions to Russia, Trump said “Oh, I think so,” on 27 April when asked whether Zelenskyy was willing to "give up" Crimea, which was annexed by Russia in 2014.
• In an interview with The Atlantic published earlier today, Trump said Putin “is going to be fine” in any negotiations. Trump “I’m trying to save a lot of lives in the world, You know, Ukraine and Russia — it’s not our lives, but it could end up in a Third World War.”