US DATA: KC Fed Services Shows Sharp Activity Decline
Jul-25 15:52
The Kansas City Fed's Tenth District Services survey showed a sharp drop in the composite index in July to -5 from positive 3 prior, marking a 19-month low. This was in contrast to the previously released KC regional manufacturing survey which showed an unexpectedly strong improvement.
- The headline index suggests a contraction in activity in the month, and is a weighted average of the revenue/sales, employment, and inventory indices. Two of these categories were sharply weaker )revenue/sales to -8 from 2, employment to -6 from 6) with inventory levels rising to 2 from -1. 6-month composite expectations hit an 8-month low 9.
- In more constructive developments, input prices fell to a 6-month low 34 (39 prior), with selling prices relatively steady at 17 (16 prior). 6-month expected prices hit a 7 month low 52.
- While this survey is consistent with other regional Feds' on the inflation stabilization front, the pullback in activity is in stark contrast to improvements elsewhere including Philadelphia, Richmond, and New York. So we will take this as an outlier, pending next week's Dallas Fed release.
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US TSY OPTIONS: Aug'25 10Y Vol for Sale
Jun-25 15:46
- -5,000 TYQ5 111.5 straddles 131-130 ref 111-16
- -8,000 TYQ5 110.25/112.75 strangles, 36 ref 111-16
OPTIONS: Larger FX Option Pipeline
Jun-25 15:45
- EUR/USD: Jun27 $1.1400(E1.2bln), $1.1415-25(E1.1bln), $1.1600(E1.1bln); Jun30 $1.1650(E2.0bln), $1.1700(E1.1bln); Jul01 $1.1700(E1.4bln)
- USD/JPY: Jun30 Y143.65-85($1.4bln), Y145.35-50($1.3bln), Y148.40($1.3bln)
- USD/CAD: Jun27 C$1.3630-45($1.2bln)
US: Senate Finance Proposes $15B Rural Hospital Fund For OBBB
Jun-25 15:37
The Senate Finance Committee has circulated a memo proposing a USD$15 billion "stabilization fund" for rural hospitals. The proposal, to be included in the GOP's One Big Beautiful Bill, is designed to assuage concerns amongst some Republican Senators that cuts to Medicaid will gut rural hospitals. The initial proposal falls well short of the USD$100 billion called for by some Senators.
- Memo: "This section would make $3 billion, in each of fiscal years (FY) 2027 through FY 2031, for a total of $15 billion in funding, available to the 50 states. Under the program, a state would be required to submit an application to the CMS Administrator in order to receive federal funding..."
- Senator Josh Hawley (R-MO) said this week: “I am confident [OBBB] will not be put on the floor as it is currently. Something will change... It’s all a work in progress.” He warned: “This rural hospital stuff, this could threaten the progress of the whole bill. Let’s resolve this and move this thing along. Otherwise, we’re going to be sitting here looking at each other in August."
- Burgess Everett at Semafor notes on X: "I do not think people fully appreciate that the final negotiations on the reconciliation bill (Medicaid, SALT, etc.) could go up until right before the bill passes and be the last amendment of the votearama."
- Punchbowl reports that SALT Republicans are currently meeting with Treasury Secretary Scott Bessent to address concerns that the Senate will water down the House-passed SALT cap.
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