US TSYS: Yields Decline Following Heavy Deluge Economic Data
May-15 19:29
- Treasuries look to finish near late Thursday session highs, well off early session lows after this morning's heavy round of economic data: PPI lower than expected (priors up-revised, however), retail sales largely in line w/ prior up-revised, weekly claims largely in-line.
- Core PPI (ex food, energy & trade services) inflation was surprisingly soft at 0.11% M/M (cons 0.3) after only a slightly upward revised 0.17% (initial 0.12) in March. Rather than showing input costs kicking higher with the implementation of reciprocal tariffs in April, the pattern of recent weakness in March and April after some strength through Dec-Feb (when it averaged 0.39% M/M) suggests tariff front-running was more inflationary.
- Additionally, Industrial and manufacturing production was a little weaker in April than expected, but while there was a pullback there was no collapse despite plummeting sentiment/survey indicators in the month. Philadelphia Fed's Manufacturing Business Outlook Survey saw a strong improvement in the headline General Business Conditions Index in May, rising 22.4 points to to a still-contractionary -4.0 (-11.0 expected, -26.4 prior).
- Currently, the Jun'25 10Y contract trades +18 at 110-09 vs. 110-11 high, still off initial technical resistance at 110-29 20-day EMA. Curves steeper in intermediates to long end: 5s30s +4.603 at 84.708. Tsy 10Y yield -.0891 at 4.4472%.
- Focus turns to Friday's data: Housing Starts, Building Permits, Import/Export Prices at 0830ET; U. of Mich. Sentiment at 1000ET followed by TIC Flow data at 1600ET.
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BOC: JPM, Desjardins See Potential For Large BoC Cuts Ahead (2/2)
Apr-15 19:27
Other institutions are relatively more dovish on BoC cut prospects: two see rates ending up below 2%, including JPMorgan and Desjardins.
BOC: Canadian Bank Analysts Split On April Cut, Eye 2.00-2.25% Terminal (1/2)
Apr-15 19:22
Analysts’ expectations of the terminal overnight rate range from 1.50-2.75%, with a median of 2.00%.
- Looking first at major Canadian banks - see table below - there is an even 3-3 split on whether the BoC cuts or holds Wednesday.
- Consensus is largely focused on a 2.00-2.25% terminal rate.
BOC: MNI BoC Preview-April 2025: Holding On For More Certainty
Apr-15 19:20
Our preview of the April Bank of Canada decision has been published - Download Full Report Here
- In what is seen as a very close call, the Bank of Canada is expected to maintain the overnight rate target steady at 2.75% on Wednesday.
- A pause would come after 225bp of cuts to the middle of the BoC’s currently estimated neutral range of 2.25-3.25%, leaving policymakers in a position to see further developments in the US-Canada trade dispute and the relevant data impact before pulling the trigger on further moves.
- A steady approach would befit BOC Governor Macklem’s comments in March that reiterated the importance of maintaining price stability, with monetary policy becoming less forward-looking and more nimble as officials attempt to navigate the uncertainty of the ongoing trade dispute with the US.
- The latest Monetary Policy Report could show upped expectations of inflation with lower growth forecasts vs the last edition in January, with the overall communications maintaining a tone of uncertainty.
- Reflecting the uncertainty, analysts’ expectations of the terminal overnight rate range from 1.50-2.75%.
