Quiet Trading Session Ahead of Next Week’s PCE Data

Rates hold in tight range following economic data. Swap rates opened the session ~2bps higher on strong durable goods orders but closed little changed after The University of Michigan consumer data. The inflation component of the UM survey showed that consumers expect 3.3% price growth over the next year and 3.0% growth over 5-10 years, both of which were lower than forecasted. The 2y Treasury yield is now at 4.95% while 5y-10y yields are near 4.50%. Elsewhere, the NASDAQ rallied ~1% on continued optimism stemming from NVDA’s strong earnings results.

US durable goods orders unexpectedly rose in April. Durable goods orders were well above forecasts in April, coming in at 0.7% versus the -0.8% estimate. The print marked the third consecutive month of advances, with April’s level being driven by demand for transportation equipment. Excluding transportation, durable goods orders rose 0.4% versus the 0.1% forecast. The data follows March’s downwardly revised 0.8% increase (from 2.6% previously).

A holiday-shortened but busy week awaits. Next week’s slate will be highlighted by inflation data and GDP. Personal consumption expenditures (PCE), the Fed’s preferred gauge of inflation, is expected to stay flat from March. Expected core price growth of 2.8% (year-over-year) would match the lowest level of inflation since March 2021. Meanwhile, Q1 GDP is expected to fall to 1.3% from the 1.6% preliminary level. Monday will be a closed session in observance of Memorial Day. Enjoy the weekend!