US TSYS/OVERNIGHT REPO: SOFR Steady, But Upside Pressure Bubbling Under Surface

• -5,000 FVM6 107-31.5, post time bid at 1034:04ET, DV01 $214,000.
• The 5Y contract trades 107-31 last (-6.5)

Economic activity was mixed in the Richmond Fed's region in April, with the Fifth District surveys showing better manufacturing conditions but weaker for non-manufacturers. As with most regional Fed surveys this month, the most glaring aspect was the pickup in reported price pressures, against the backdrop of a war-driven energy price rise.

• Starting with manufacturing, the composite index ticked up to 3 from 0 in March (better than the expected improvement to 1), with 2 of 3 component indices rising (new orders to 8 from 4, employment to 0 from -2) and shipments unchanged (-2). The less-looked-at local business conditions index jumped to 10 to -5; the forward-looking expectations indices weakened, however.
• The breakdown of subcomponents means the national ISM equivalent PMI for the Richmond survey rises to 55.8 from 53.4 prior, the best in 49 months. Regional manufacturing survey composites were steady/improved in 4 of 5 regions in April, Kansas City excepted.
• Services have been more mixed in April. The Richmond non-manufacturing survey local business conditions index decreased to -6 in April from 2 in March, with the demand index fell to 10 from 21 and current employment decreased to 6 from 9; however the revenues index was unchanged at 9, and in contrast with the manufacturing survey, expectations were improved across the board. So far the headline indices for two non-manufacturing surveys (this and KC) have deteriorated vs April with three (Empire, Dallas and Philly) improving.
• Where most of the surveys agree is that price pressures picked up in April: Richmond manufacturing prices paid rose to 6.4% (on a 12-month lookback basis) from 6.1% prior, with expected prices paid up 1pp to 6.0% for the highest in 5 months (though received/ expected received were a touch lower/flat respectively). For Richmond non-manufacturing, current received ticked up to a 5-month-high 5.7% (4.8% prior) with expected at a 6-month high 5.1%, while expected current and received also both ticked higher. These are all still fairly tame by recent standards but the notable pickup in manufacturing prices after 2025's tariff announcements has yet to abate.

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