FED: US TSY 17W BILL AUCTION: HIGH 3.855%(ALLOT 76.38%)

• 10,000 Eris SOFR Jun'26 3Y Swap, 97.655 FV01 $274,300
• vs. 5,000 Eris SOFR Sep'25 2Y Swap, 99.535 DV01 $95.030
• A few minutes earlier:
  • 15,000 Eris SOFR Jun'26 2Y Swap 97.935, appr DV01 $280,000 at 1057:05ET
  • 15,000 Eris SOFR Jun'25 2Y Swap 98.555, appr DV01 $280,000 at 1050:54ET

Monthly data for June show US construction spending concluded Q2 on a soft note, with a 0.1% M/M drop (+0.2% expected) following a downward revision to May (0.0%, previously reported at 0.1%). That meant overall construction value remains below the level seen at the start of the year, with a 4.9% quarterly annualized contraction following March's 5.5% drop. 

• And that's with public sector construction picking up pace, rising 5.9% 3M/3M SAAR for the highest since the end of 2024.
• Private sector construction as a whole has been weak: it shrank at a 8.1% quarterly rate in Q2, which was the worst since 2009, dragged down by a 14% quarterly drop in residential construction, also the weakest since 2009.
• Non-residential private sector construction only shrank slightly, at a 1.0% quarterly rate, which was the least negative since Q1 2025. But that's with the saving grace of data center construction which has shrugged off a slight slowdown earlier in the year and is now rising at a 63% quarterly annualized rate. (That also doesn't include other areas that may be boosted by AI infrastructure buildout including Power construction, up 12.5% over the last year).
• Without data centers, nonresidential private sector investment would have contracted at a 5.3% Q/Q SAAR pace. Within this, manufacturing construction is collapsing, down 17% at a quarterly rate and now back to levels last seen in 2022.
• These figures are all reported in value terms, so the growth rates partly reflect inflationary effects (data center costs appear to be steep), but that makes the "real" negative readthrough all the more negative.