Sluggish data
June 5, 2025
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Alex Manzara
Thu 6/5/2025 5:19 AM
–Fives, tens and bonds fell nearly 10 bps yesterday, to 3.93%, 4.363 and 4.886. The Fed Effective rate of 4.33% has been a magnet for the 10y yield, and once again the two are nearly equal. SOFR contracts up 8 to 9.5 from SFRH6 to SFRH9. Pretty much a parallel shift to lower rates across the curve. Peak contracts are Z6 and H7, both settling +9 at 9677.5. ADP lower than expected at 37k, ISM Service PMI fell below 50 to 49.9. USU5 settled 113-17 and now prints 113-25; should be strong resistance around 114-04 to 08. Last payroll report on 2-May USU settled 114-18. TYU was 111-08 on 2-May, now 111-04.
From the Beige Book:
Comments about uncertainty delaying hiring were widespread. All Districts described lower labor demand, citing declining hours worked and overtime, hiring pauses, and staff reduction plans. Some Districts reported layoffs in certain sectors, but these layoffs were not pervasive.
Prices have increased at a moderate pace since the previous report. There were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward. A few Districts described these expected cost increases as strong, significant, or substantial. All District reports indicated that higher tariff rates were putting upward pressure on costs and prices.
In terms of the Fed’s mandates, labor is now likely more important, but the general picture is somewhat stagflationary.
–Today’s news includes Productivity and Jobless Claims, with the latter expected 240k. Payrolls tomorrow expected 130k.
