RATINGS: Moody's Downgrades US's AAA Rating As Deficits Seen Ballooning

The Treasury General Account soared by $185B on Tuesday's key tax collection day, to just over $600B - easily the highest cash level since late February. 

• At this point, tax revenue is coming in at a pace almost exactly in line with 2024, at $270.3B collected in each year when considering corporate and individual collections for tax day and the preceding 5 days.
• Unusually, though, individual tax collection didn't jump as much as may have been expected on April 15: to $53B from $48B, suggesting that many individual taxpayers submitted on Monday instead of waiting for the Tuesday (in 2024, April 15 fell on a Monday).
• And also unusually for the April tax deadline day, corporate tax payments eclipsed their individual counterparts, coming in at $65B vs $24B the prior day (usually it's a little more spread out across days).
• Either way, the jump in the TGA is a good sign that estimates of the "x-date" for Treasury running out of cash will not have to be pulled forward as a result of the early tax take. We didn't see many estimates of today's collection but Wrightson ICAP estimated that the TGA would rise by $165B today, so this was eclipsed by $20B.
• As the chart below shows, this is easily the most important day for the TGA increase - and gains so far are tracking ahead of prior years.

• Treasuries look to finish near late session highs Wednesday, gathering risk-off support as Fed Chair Powell discussed his outlook at the Chicago Economics Club, stocks extended lows (but drew some buying late). Chairman Powell warned inflation may be more persistent due to larger than expected tariffs, exacerbated by policy uncertainty.
• "I do think we'll be moving away from" the dual mandate goals "probably for the balance of this year. Or at least not making any progress, and then we'll resume that progress as we can," Powell said.
• Treasury Jun'25 10Y futures trade +11 at 111-13.5 after the bell vs. 111-17.5 high, just off technical resistance at 111-25 (50.0% retracement of the Apr 7 - 11 bear leg), 10Y yield at 4.2806% (-.0524). Curves are steeper but off first half highs: 2s10s +1.691 at 50.081, 5s30s +4.769 at 83.808.
• The NY Fed services business activity index was weaker than expected in April as it failed to bounce and instead dipped to -19.8 (cons -12.1, 4 responses) after -19.3 in March. Other important details within the report were notably glum, with the current business climate falling further to -60.7 from -51.7 (-21.8 in Jan having averaged -24.5 in 2024 for example) to its lowest since Feb 2021.
• March industrial production was largely as expected, with headline IP growing contracting by 0.3% M/M (-0.2% survey) but prior upwardly revised by 0.1pp (+0.8%). Manufacturing production rose by 0.3% (0.2% survey 1.0% prior upwardly revised from 0.9%). Capacity utilization fell slightly (77.8% vs 78.2% prior).

• MNI: US TSY TICS NET FLOWS IN FEB +$284.7B
• US TSY TICS NET L-T FLOWS IN FEB +$112.0B