OPTIONS: Expiries for May02 NY cut 1000ET (Source DTCC)

Spillover from the move lower in core global yields ahead of “Liberation Day” leaves GBP 1y1y on track to register the first close below 3.85% since February.

• The February closing low/double bottom support area (3.8145%) presents the next notable downside level of interest.

Fig. 1: GBP 1y1y Swap

Source: MNI - Market News/Bloomberg

• Treasuries paring gains slightly, still holding higher range after mildly higher than expected S&P Mfg PMI data, stocks pare losses (SPX eminis -5.00 at 5648.25).
• Tsy Jun'25 10Y contract trades 111-18.5 (+11.5), off earlier high of 111-27.5, next technical resistance at 112-01 (High Mar 4 and a bull trigger).
• Curves continue to  bull flatten off early week highs: 2s10s -2.694 at 29.105, 5s30s -1.852 at 60.088.
• Cross asset update, Bbg US$ index +.95 at 1275.20, Gold making new highs around 3135.0, crude adding to Monday's rally (WTI +.34 at 71.82.).
• Next up: JOLTS, Construction Spending and ISM mfg data at 1000ET.

• The manufacturing PMI was revised up slightly in the March final release to 50.2 (cons 49.9, flash 49.8), although still sees a sizeable decline from 52.7 in February (highest since Jun 2022).
• The press releases summarizes the report as: “Production declines in March as order book growth slows on tariff uncertainty”
• It also confirms strong input cost inflation indicated in the flash release, at its highest in “over two-and-a-half years”. The flash release, for both manufacturing and services, had noted that “Input price inflation accelerated sharply, especially in manufacturing, to a near two-year high, often attributed to the impact of tariff policies. However, competition limited the pass-through of higher costs to selling prices.” Here, specifically for manufacturing, output price inflation increased to a 25-month high. 

Some highlights from the full press release (here): 

• “US manufacturing sector growth stalled in March. Having grown strongly in February, production declined as order books expanded only modestly despite evidence of a stabilization of exports.
• Confidence in the outlook for business activity softened, amid some uncertainty over the impact of federal government policies.
• Employment numbers were unchanged after four months of job gains. Softer trends in output and new orders, plus uncertainty in the outlook, weighed on hiring decisions.
• Cost pressures intensified, largely due to the impact of tariffs, with input price inflation rising to its highest level in over two-and-a-half years.”
• Further on prices: “The steep increase in input prices fed through to a greater rise in manufacturing selling prices during March. Latest data showed that output price inflation picked up for a fourth successive month to a 25-month high.”