US OUTLOOK/OPINION: Q2 GDP Revisions Expected To Show Firmer Consumption
Aug-27 17:27
- The week’s data picks up significantly from tomorrow with the second estimate for Q2 national accounts and weekly jobless claims at 0830ET.
- The national accounts release offers first revisions to real GDP growth of 3.0% annualized in Q2 having surprised stronger in the flash release (then consensus 2.6%, GDPNow 2.9%) after -0.5% in Q1.
- Bloomberg consensus looks for a small upward revision to real GDP growth with 3.1% as private consumption being revised up two tenths to 1.6%.
- Smoothing the tariff-distorted quarters out, the average of 1.2% annualized for real GDP growth in 1H25 was a clear slowdown from the 2.5% through 2024.
- Domestic demand will continue to be watched for signs of underlying economic strength after PDFP slowed to 1.2% in Q2 for its slowest quarter since 4Q22. Similarly, the 1.6% in 1H25 followed 3.0% through 2024. Residential investment was a sizeable drag here with a -0.2pp contribution to GDP growth as the housing market remained under pressure.
- Core PCE inflation revisions for Q2 can also give hints as to what to expect in Friday’s monthly release for July (specifically for revisions to Q2 months of course, whilst we have seen unrounded core PCE estimates average 0.28% M/M for July). The median analyst looks for a very small upward revision to a rounded 2.6% from a starting point of 2.54% annualized, although currently only has 10 responses.
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US TSYS/SUPPLY: Financing Ests Set To Show Pickup In Cash-Build Borrowing (1/2)
Jul-28 17:23
Monday’s marketable borrowing requirements (3pm ET) will show a substantial increase in Treasury’s estimate for marketable borrowing in the current quarter (Jul-Sep), due to a cash raise totaling $393B. We detail this and other expectations in our Refunding preview - PDF here.
- We have penciled in a $950B-$1T borrowing need in the quarter (on a financing need of $500-550B), up from the May refunding round’s $554B estimate. Analyst expectations for the quarter’s borrowing requirements run from roughly around $900B to $1.1T.
- For the Oct-Dec quarter, we estimate a $600B marketable borrowing requirement on a $525B financing need. This is roughly in line with consensus.
- Our expectations of today's Sources - Uses table is as follows:
SOFR OPTIONS: Sep'25 SOFR Put Fly Sale
Jul-28 17:16
- -30,000 SFRU5 95.37/95.62/95.75 put flys 9.0 vs. 95.83/0.46%
BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Bunds After EU-US Trade Pact
Jul-28 17:15
EGBs outperformed Gilts Monday as the implications of the EU-US trade pact agreed over the weekend were digested.
- Yields headed lower in early trade on the growth concerns implied by an increased tariff on EU exports to the US and the diminished prospects for EU retaliation on US imports, but the rest of the session saw a pronounced divergence between Gilts and Bunds.
- An MNI Policy sources piece ("MNI SOURCES: Markets Overplaying ECB's Hawkish Shift") boosted EGBs, led by the short end.
- German yields spiked briefly on defence spending headlines, but the move faded as there was nothing new (previously reported in June).
- The German curve bull steepened, with the UK's bear flattening.
- Periphery/semi-core EGB spreads were mostly lower.
- Tuesday's calendar includes UK money supply/consumer credit data, ECB CPI expectations, and Spanish retail sales.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 3bps at 1.918%, 5-Yr is down 3.1bps at 2.267%, 10-Yr is down 2.9bps at 2.689%, and 30-Yr is down 1.1bps at 3.196%.
- UK: The 2-Yr yield is up 2.2bps at 3.906%, 5-Yr is up 1.7bps at 4.075%, 10-Yr is up 1.2bps at 4.647%, and 30-Yr is up 0.5bps at 5.454%.
- Italian BTP spread down 1.7bps at 81.7bps / Spanish down 1.1bps at 58.5bps
