It looks bad, but we don’t have hard evidence
April 30, 2025
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— Soft data is Joe Biden wandering around aimlessly on stage, hard data is Morning Joe Scarborough saying he’s as sharp as a tack.
–Perhaps it’s a tasteless analogy, but I think that’s what we’re seeing with soft economic surveys: unassailable evidence of decline. Yesterday it was Consumer Confidence, which plunged to 86.0 vs expected 88. We’re at the covid low! (85.7 in April 2000). Dallas Fed Mfg imploded to -35.8 on Monday while Services, reported yesterday, slid to -19.4 vs last at -11.3. JOLTS has been in steady decline, now at 7192 (expected 7500). Atlanta Fed’s GDP Now was updated yesterday to -2.7% for Q1, with Gold adjusted at -1.5%. The NY Fed is reading off the teleprompter at +2.63% for Q1. This morning we’ll see the official Advance number for Q1, expected to be somewhere in the middle, just slightly positive. PCE Prices yoy expected 2.2% from 2.5% with Core 2.6 from 2.8. QRA auction composition in the afternoon. META and MSFT report.
–SFRU6 settled at new high for the move at 9702.5 (though the high tick was 9728 on 4/7). High settle post-ease was 9706 on October 1. Even though this contract is 130 bps below the current Fed Effective rate of 4.33%, midcurve 0QU5 9750c are 17.25 (0.30d) while the 9650p are 12.25 (-0.25d), so 5.0 premium to the call. New recent lows posted in near SOFR calendars: SFRM5/U5 3mo spread settled -41.5, down 2 on the day. SFRM5/M6 one-year clalendar is at -108 bps (9690.5/9698.5) down 3.5 on the day and 27 from April 15, while SFRU5/U6 is -70.5 (9632.0/9702.5).
–In treasuries, tens eased another 4.8 bps to a yield of 4.172%. The 2yr down 3 bps to 3.658%. Gundlach says the Fed always follows the 2y. The question is when.
