US TSYS: Tsy Ylds Dip, Home Sales Fall, Claims Steady, Fed Williams on Inflation
Jul-09 19:45
- Treasuries look to finish near moderate late session highs Thursday - rather subdued session after home sales drew a larger reaction in markets then weekly claims, little reaction to Fed speak, US/Iran tensions on simmer after trading attacks overnight.
- NY Fed's Williams made similar comments in a moderated discussion Thursday to those he's made in recent weeks about inflation being too high now but expected to recede in the coming quarters - headlines from the discussion (which wasn't publicly broadcast) are below.
- The Fed has announced details of the 5 task forces announced by Chair Warsh at the June FOMC meeting, with some well-known names on the roster (link here)
- Existing home sales unexpectedly fell in June, coming in at 4.09M (seasonally-adjusted annualized rate) vs 4.20M consensus/4.19M prior rev from 4.17M. The 2.4% pullback was the first drop in 3 months and drags sales closer to the 4M level that has prevailed for most of the last 2 years after May's was the 2nd highest since mid-2023.
- Initial claims were close to expected as they dipped to 215k (sa, cons 217k) in the week to Jul 4 after an upward revised 217k (initial 215k). Continuing claims were little changed at 1814k (sa, cons 1814k) in the week to Jun 27 after a downward revised 1806k (initial 1814k), consolidating rather than extending an increase off May lows of 1718k.
- TYU6 currently +8 at 109-08 (10Y yld -.0420 at 4.5371%). Treasuries maintain a softer tone despite today’s gains. This week’s move lower reinforces a bear threat. The move down resulted in a breach of 109-06, the Jun 22 low, signalling scope for an extension towards 108-25, the Jun 8 low. Key support and the bear trigger is 108-08+, the May 19 low. Initial firm resistance to watch is 109-25+, the Jul 2 / 6 high. A break of it would be bullish and expose 110-10+, the Jun 26 high and bull trigger.
- Look ahead: Norwegian CPI data is scheduled on Friday, ahead of Canada June employment data. No scheduled US data on tap tomorrow, focus on next week's CPI and PPI data on Tuesday/Wednesday respectively.
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US INFLATION: Tech-Led Inflation May Have Slowed After Shortage-Driven Boom
Jun-09 19:41
Semiconductor Shortages Remain But Software Inflation Could Have Slowed (More A Core PCE Story)
- Within the CPI core goods details, computer software & accessories remains a notable small category to watch after an extremely strong run owing to semiconductor and other tech-related shortages.
- It’s still hard to get a sense of what’s expected here although we judge it’s for a softer increase than the 5.0% M/M in April (for a cumulative 26% increase between Nov-Apr).
- The Adobe DPI saw another strong increase but notably less so than the prior month, Citi write “We expect a much more modest increase this month and for this component to move sideways to lower later in the year” and JPM write “We expect that price increases continued there. However, price histories for some of the bestselling models on Amazon.com suggest that the rate of increase slowed substantially in comparison to earlier months.”
- This category needs less of an introduction now but remember that it has a weight of only 0.04% in core CPI vs 1.2% for core PCE, having added 0.06pp to core PCE alone in April.
US TSYS: Tension Flares, Trump Warns Iran After Chopper Downing, CPI up Next
Jun-09 19:40
- Treasuries look to finish near midsession highs after some two-way geo-pol related volatility Tuesday. Sky News Arabia reported that the draft agreement has been sent to the American side for its review, with confirmation that the draft is preliminarily acceptable to the American administration.
- However, crude bounced off session lows after President Trump posted on Truth Social to say he would respond to the Iranian downing of a US helicopter, threatening to raise tensions. While it may contradict Trump’s statements earlier of progress to a deal, the US may think it can take some form of limited action without completely derailing the talks.
- Weekly ADP private employment increased an average 29.0k per week in the four weeks to May 23, slightly moderating from 30.5k in the prior week (a new value for the weekly series but one that chimed with the monthly series released instead that week) and an unrevised 35.75k the week before that.
- Focus on CPI tomorrow morning, inflation expected to moderate to a still elevated pace in May, with MNI unrounded consensus pointing to 0.51% M/M for headline CPI and 0.23% M/M for core CPI. It should see headline CPI jump further to 4.2% Y/Y with a risk of 4.3% (either strongest since Apr 2023) whilst core CPI would see a more modest acceleration to 2.8-2.9% Y/Y (strongest since Sep 2025).
- TYU6 trades +5.5 after the bell to 109-06.5 (108-27.5 low). Resistance to watch is 110-04, the 50-day EMA. The bear trigger lies at 108-08+, the May 19 low. Clearance of this level would confirm a resumption of the downtrend.
- Today's 3Y Note sale (91282CQV6) tailed slightly: 4.192% high yield vs. 4.190% WI; 2.64x bid-to-cover over the 5-auction average of 2.616x.
US INFLATION: Supply Chain Pressures Hold Recent Strong Increase Before May CPI
Jun-09 19:37
- Supply chain pressures continue to point to upside inflation risks according to the NY Fed’s GSCPI, not that it was reflected in April’s CPI release when core goods inflation underwhelmed (0.03% M/M or 0.04% ex-used cars).
- The GSCPI sat at 1.8 standard deviations above its historical average (highest since mid-2022) for a second consecutive month.
- Core goods inflation was running closer to 0.3-0.4% M/M the last time the GSCPI index was at these levels.
