EUROZONE DATA: Construction Increases By Most Since Early 2023
Jun-19 10:39
Construction production saw an unusually strong increase in April, boding slightly better for Q2 GDP growth tracking, but it looks out of sorts with forward-looking indicators.
- Eurozone construction production increased a particularly strong 1.7% M/M in April (swda) for its strongest monthly increase since Feb 2023.
- It does however follow a -0.2% M/M in March (revised from 0.1%) and -0.6% M/M in February.
- The year-ago rate of 2.3% Y/Y (also swda) was its strongest since Dec 2023.
- Whilst we’d imagine some payback is likely in the months ahead, a crude assumption of two flat months in May and June would see construction rise 1.3% Q/Q non-annualised in Q2 after 0.5% in Q1.
- It’s promising as a sign of broader response to lower interest rates (the ECB had already cut a cumulative 150bp up to March with another 25bp in mid-April before a further 25bp earlier this month), but direct impact on GDP growth is limited.
- Construction added 0.03pps to real GDP growth in Q1 (non-annualised) with current tracking suggesting about double that for Q2.
- What’s more, improvements look unlikely to be sustained when looking at the EC confidence indicator.
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STIR: Fed Implied Rates A Touch Lower, Barkin and Musalem Pick Of Fedspeak
May-20 10:38
- Fed Funds implied rates are up to 1.5bp lower on the day for 2025 meetings, almost fully pricing a next cut with the September meeting.
- Cumulative cuts from 4.33% effective: 2bp Jun, 9bp Jul, 24bp Sep, 37.5bp Oct and 55bp Dec.
- SOFR implied yields are a little softer further out the curve, with the terminal yield 2.5bp lower at 3.335% (SFRZ6) having struggled to meaningfully shift away from ~100bp of cuts for the cycle.
- Yesterday saw NY Fed’s Williams even more explicit than usual in offering a rough timetable behind rate cut patience, with broader FOMC communications continuing to suggest that a cut before the end of summer is not in the frame.
- Amidst today’s second day with a solid Fedspeak docket, we focus on Barkin and Musalem for updates since the May 12 de-escalation in US-China trade policies and subsequent fiscal plans.
- Musalem, one of the most hawkish members on the FOMC, said May 10 that the Fed must ensure tariffs don’t lead to persistent inflation but it may tolerate higher inflation to lessen the employment cost. He added that trade de-escalation could get the economy back on track.
- Barkin on May 9 noted that consumer spending and business investment is still very solid although it’s not a given that firms can raise prices on tariffs.
- 0900ET – Bostic (non-voter) opening remarks in second day of Atl Fed Financial Markets conference
- 0900ET – Barkin (non-voter) speech at Richmond Fed conference (text only)
- 0930ET – Collins (’25 voter) brief remarks at Fed Listens event – won’t touch on current mon pol or outlook
- 1300ET – Musalem (’25 voter) speaks on the economy and mon pol (text + Q&A)
- 1700ET – Kugler (voter) commencement address (text only)
- 1900ET – Hammack (’26 voter) and Daly (non-voter) in panel discussion with Bostic (Q&A only)
ESM ISSUANCE: 6-Month ESM-Bills
May-20 10:34
| Type | 6-month bills |
| Maturity | Nov 20, 2025 |
| Amount | E1.094bln |
| Target | E1.1bln |
| Previous | E1.085bln |
| Avg yield | 1.973% |
| Previous | 2.096% |
| Bid-to-cover | 2.89x |
| Previous | 2.43x |
| Previous date | Apr 15, 2025 |
US 10YR FUTURE TECHS: (M5) Support Remains Exposed
May-20 10:32
- RES 4: 112-20+ High May 1 and a bull trigger
- RES 3: 112-01+ High May 2
- RES 2: 111-22 High May 7 and a key near-term resistance
- RES 1: 110-23+ 20-day EMA
- PRICE: 110-09 @ 11:21 BST May 20
- SUP 1: 109-18+ Low May 15
- SUP 2: 109-08 Low Apr 11 and key support
- SUP 3: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
- SUP 4: 108-21 Low Feb 19
Treasury futures maintain a bearish tone and the contract is trading closer to its recent lows. Support at 110-01+, 76.4% of the Apr 11 - May 1 bull leg, has been cleared. The breach strengthens a bearish theme and exposes key support at 109-08, Apr 24 low and a bear trigger. Key near-term resistance is at 111-22, the May 7 high. A move above this level is required to signal a potential reversal. First resistance is at 110-23+, the 20-day EMA.
