US OUTLOOK/OPINION: Consensus Doesn't Join Powell Eyeing Upward GDP Revisions
May-29 11:27
- Ahead of today’s 0830ET second Q1 GDP release, Bloomberg consensus sees real GDP growth remaining at -0.3% annualized in Q1, with a small downtick in personal consumption (from 1.8% to 1.7%) the only revision expected from median estimates.
- Recall that last month's advance release saw real GDP growth 'surprise' with -0.3% for Q1. Whilst it appeared close to the -0.2% consensus, it was better than the -0.8% median from 26 analysts who had updated forecasts following March advance trade data just a day beforehand plus the Atlanta Fed's GDPNow of -1.5%.
- Large swings in trade (-4.8pps) and inventories (+2.25pps) in Q1 on tariff front-running has made it harder to get a sense of underlying momentum in the economy. However, one notable finding in the advance release was that final private domestic purchases was robust at 3.0% annualized in Q1 after 2.95% in Q4 and an average 3.0% in 2024 - a point that was unsurprisingly made in the May FOMC press conference.
- It was helped by a surge in non-residential investment (9.8%, adding 1.3pp to GDP growth) plus consumption growth at a softer but still relatively healthy 1.8% (after 4.0% in Q4) vs an expected 1.2%. Both of course were likely boosted by tariff front-running as well.
- Powell talked on the nature of the large trade drag as well as his expectations for upward revisions: "So that could, in the second quarter, be reversed so that we have, you know, an unusually large [negative] contribution to-unusually positive. That's very likely as imports drop sharply. You could also have-you know, very likely you'll have restatements of the-of the first quarter. It'll turn out that consumer spending was higher. It will turn out that inventories were higher. And so you'll see -you'll see those data revised up. It may actually go into the third quarter, too. And so I think it's going-this whole process is going to, a little bit, make it harder to make a clean assessment of U.S. demand."
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OUTLOOK: Price Signal Summary - Bull Cycle In Gilts Still In Play
Apr-29 11:23
- In the FI space, Bund futures have pulled back from their recent highs. Despite the latest move down, a bull cycle remains in play and the sell-off between Apr 7 - 9 is considered corrective. Attention is on resistance at 132.03, the Apr 7 high and a bull trigger. Clearance of this level would confirm a resumption of the uptrend and open 132.56, the Feb 28 high. Firm support lies at 130.70, the 20-day EMA.
- Gilt futures are holding on to their latest gains. The recent rally marks an extension of the recovery that started Apr 9. 92.63, the Apr 8 high, has been breached, exposing 93.44, the 76.4% retracement of the Apr 7-9 sell-off. A break of this level would strengthen the current bull cycle and open 94.50, the Apr 7 high and a key resistance. On the downside, support to watch is 92.30, the 20-day EMA.
EGB SYNDICATION: Portugal 15-year mandate
Apr-29 11:11
"The Republic of Portugal has mandated BBVA, Deutsche Bank, Goldman Sachs Bank Europe SE, J.P. Morgan, NovoBanco and Santander as Joint Lead Managers for a forthcoming 15-year EUR 3bn (Will not grow) Portuguese Government Bond (PGB) maturing on 15 June 2040."
From market source
US TSYS: Modestly Lower Ahead of Bessent Briefing and Data
Apr-29 11:00
- Treasuries are mildly lower on the day after a late open for cash with a Japan holiday despite recent downward pressure in equity futures.
- The net move lower after yesterday’s sizeable bull steepening has been aided by the WSJ reporting after the close yesterday that Trump is expected to soften the impact of auto tariffs.
- Bessent at 0830ET in a White House briefing with Leavitt today drew some short-lived optimism on trade deal progress yesterday, and will be watched today.
- Data will also be important, including trade, JOLTS and consumer confidence, along with earnings (including Booking, Snap, Starbucks, Visa after the close) and Trump headlines.
- Cash yields are 1-2bp higher across the curve, consolidating yesterday’s bull steepening with 2s10s for example at 52bps.
- TYM5 trades at 111-25+ (-04+) on particularly low volumes of 215k although the Japan holiday will have impacted at the margin.
- It has pulled back off yesterday’s high of 111-31 having cleared resistance at 111-25 (50% retrace of Apr 7-11 bear leg). This undermines a recent bearish theme, opening the round 112-00 before 112-12 (61.8% retrace of Apr 7-11 bear leg).
- Data: Advance goods trade balance Mar (0830ET), Wholesale/retail inventories Mar P/Mar (0830ET), FHFA/S&P CoreLogic House prices Feb (0900ET), JOLTS Mar (1000ET), Conf. Board consumer survey Apr (1000ET), Dallas Fed services Apr (1030ET)
- Bill issuance: US Tsy $70B 6W bill auction (1130ET)
- In case missed yesterday, Treasury's latest borrowing estimates were slightly higher than MNI's estimates, at $514B for the Apr-Jun quarter and $554B for the Jul-Sep quarter (MNI had pencilled in $500B for each quarter). There may have been some disappointment given Treasury did not lower the quarter-end TGA cash targets, which had been expected by some, but the current quarter's borrowing requirements are - excluding the effect of TGA cash rebuild - actually $53B lower than estimated at the last refunding in February. It could tilt the balance on Wednesday’s full QRA to no change in guidance on nominal coupon sizes being unchanged for “at least the next several quarters”, a positive development for Treasuries.
