EU AUTOMOTIVE: Volkswagen: Porsche Profit Warning        

Tsy futures drifting near session highs (TYU5 at 111-30.5, +6 vs. 111-31.5 high) ahead of the $16B 20Y bond auction (912810UN6) at 1300ET, WI is currently at 4.866%, 6.9bp rich to last month's stop. Today's results will be available shortly after the competitive auctions closes at 1300ET.

• July auction recap: Treasury futures consolidated slightly (TYU5 111-01.5 -111.5) after the $13B 20Y Bond auction (912810UL0) reopen traded through, drawing a high yield of 4.935% vs 4.950% When-Issued yield at the cutoff; 2.79x bid-to-cover vs. 2.68x prior.
• Peripheral stats: indirect take-up at 67.4% vs. 66.7% prior; direct bidder take-up 21.9% from 19.9% prior; primary dealer take-up of 10.72%.

The Atlanta Fed’s Business Inflation Expectations survey saw a second month having pared but not fully reversed tariff-driven increases whilst firms’ own-price expectations reversed a sizeable increase seen the previous quarter. 

• 1Y ahead inflation expectations from the regular monthly survey, defined as the mean expected change in unit costs, were near unchanged in August at 2.26% after 2.29% in July. That’s after easing in the three previous months from a recent peak of 2.76% in April.
• It remains a little above the 2.04% seen in December or the 1.94% averaged in 2019.
• A separate quarterly question meanwhile saw mixed developments for firms’ own price expectations, with a firming in realized inflation over the past twelve months but softer expectations ahead.
• Specifically, realized own price inflation stood at 4.3% Y/Y after 3.9% in the May survey, its highest since Aug 2024, whilst expectations cooled from 5.0% (highest since Dec 2022) to 3.9% (lowest since Nov 2024 survey).
• Away from inflation expectations, the summary notes that “Sales levels and profit margins "compared to normal" increased”. 

• EUR/USD: Aug22 $1.1660-75(E1.1bln); Aug25 $1.1640-55(E2.2bln
• USD/JPY: Aug22 Y147.90($1.5bln)
• AUD/USD: Aug25 $0.6510-25(A$1.1bln)