KEY NUMBERS
10-Year: 4.272% (+2.4bps) | 30-Year: 4.120% | SPX Futures: 7,007 | WTI: $92.32 | Gold: $4,814 | Corp OAS: 79bps
Empire Manufacturing: 11.0 vs 0.0 consensus (prior -0.2) Import Price Index MoM: 0.8% vs 2.3% consensus Import Price Index ex Petroleum MoM: 0.1% vs 0.3% consensus Import Price Index YoY: 2.1% vs 4.4% consensus Export Price Index YoY: 5.6% vs 4.8% consensus
Empire Manufacturing just printed 11.0 against a consensus of 0.0 and a prior of -0.2. That is not a beat. That is a complete repudiation of the manufacturing contraction narrative. New York manufacturing activity surged in April.
At the same time, Import Price Index MoM came in at 0.8% against a 2.3% consensus. Import cost pressures are easing month-over-month. Ex-petroleum, 0.1% against a 0.3% consensus.
Read those two prints together. Manufacturing activity is surging while import costs ease. In isolation, both look constructive. Together they create a problem for the Fed. Surging manufacturing activity means demand is not breaking. Easing import prices means the disinflationary impulse may be supply-side, not demand destruction. That combination keeps the Fed pinned — no clear signal to cut, no clear signal to hike.
The number that gets buried in the headline is Export Price YoY at 5.6% against a 4.8% consensus. US export prices are accelerating. That is dollar strength and global demand for US goods showing up simultaneously. It also means US inflation is being exported globally. The bond market will price that differently than the equity market does.
The 10-year is holding 4.272%. The data this morning should have moved it. It didn't. The bond market is not trading the data. It is waiting for tomorrow.
Trump threatened to fire Powell this morning. Warsh testifies tomorrow at 10am. The Beige Book drops at 2pm today. The bond market has decided nothing gets priced until it hears what Warsh actually says under oath.
That is the most important signal in this morning's data — the absence of a reaction to data that warranted one.
THREE THINGS TO WATCH TODAY
Fed Beige Book — 2:00pm. Twelve Fed districts, real conditions on the ground. Watch for private credit and commercial real estate language. In an environment where official data and the bond market are diverging, the Beige Book matters more than usual today.
The long end into tomorrow's hearing. If 10-year and 30-year yields drift higher this afternoon, the bond market is beginning to reprice the Warsh outcome ahead of the hearing. Watch the 2s10s spread.
Pimco bought the entire $400 million Blue Owl BDC bond offering this morning — priced at 6.5%, rated Baa2/BBB-. Bloomberg describes the private credit industry as battered by record redemption requests and concerns over valuations, liquidity, and transparency. That language is the first mainstream acknowledgment of a thesis this channel has documented since January. The damage is becoming visible.
Today at 10am — What the big bank earnings told the bond market that financial media missed. JPMorgan record FICC revenue, the Wells Fargo NII squeeze, and the private credit connection nobody made. Full analysis in The Dispatch — link in the newsletter.
The Warsh hearing analysis publishes Monday morning before the open.
The Bond Bro Dispatch. Educational and macro commentary only. Not investment advice. CFA charterholder. Positive Carry LLC, 6586 Atlantic Ave #115, Delray Beach, FL 33446.