GILTS: Bid, But Rangebound

The Richmond Fed's manufacturing survey for March fully reversed February's improvement, with forward-looking survey components pulling back sharply, but inflation expectations soaring.

• March's composite index registered -4 (positive 1 was expected), down from positive 6 in February and as such back to the same -4 level seen in January. These figures remain well above the double-digit negative levels seen in 2H 2024, though the latter may have been influenced by various idiosyncratic factors including hurricanes and a work stoppage/order cancellations at Virginia-headquartered Boeing.
• As with the headline figure, New Orders reverted back in March, to -4 (0 prior, -4 in January), while 6-month expectations dropped to a 29-month low -22.0 (positive 2.0 prior). Employment fell to -1 from 9, while shipments dropped to -7 from 12.
• Regional manufacturers saw a huge increase in the level of inflation over the next 12 months - expected price changes jumped to 7.2% from 4.6% prior, with expected prices received up to 4.0% from 3.2% (actual prices paid/received also jumped, respectively by 1.5pp to 3.75% / 0.7pp to 2.3%).
• Expected price pressures are as high as they've been in the 20+ year survey, equalling the pandemic jump.
• That's unsurprising given tariff concerns but offers a further suggestion that manufacturers are bracing for both softer demand and higher input prices (which may not be fully passed on to consumers, as suggested by the gap between expected prices paid/received).

• One major factor behind the further decline in confidence within the Conference Board consumer survey was a second month with a sharp uptick in inflation expectations.
• The median 1Y ahead figure increased to 5.1% (highest since May 2023) for a 0.4pp increase from Feb after what was a 0.5pp increase from Jan.
• This figure was 4.2% in Jan and had seen two months at 4.0% in late 2024 at what had been close to the 3.8% averaged in 2019 and 3.9% in 2018 for a comparison with ‘normal’ periods.
• It’s a sharp two-month increase in consumer expectations although it hasn’t been as pronounced as the separate U.Mich survey which has displayed a huge range of views depending on political leaning. Expect particular focus on the March release for the NY Fed’s consumer survey for an alternative take, although that’s not until Apr 14.
• Back to the Conf. Board’s press release: “Write-in responses also showed that inflation is still a major concern for consumers and that worries about the impact of trade policies and tariffs in particular are on the rise. There were also more references than usual to economic and policy uncertainty.”
• “Meanwhile, consumers’ optimism about future income—which had held up quite strongly in the past few months—largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations.”

• The German Bund is back above the 128.00 figure, the latest leg higher was boosted by the US Data coming below expectations.
• There isn't much in Terms of technical at current level, with the initial upside area of interest seen at 128.48, Monday's Opening gap, Bund only managed a 128.46 high Yesterday.