Rates Spark: How To Spend It

2025-03-26 04:30:00 ET

Summary

• We show that the Treasury market is not discounting a recession currently - even with the US consumer somewhat navel gazing. Still spending, but not thrilled about the future, it seems.
• In the UK, the Spring Statement lends itself for another look at fiscal trajectories.
• In fact, Germany compares rather well, despite the planned spending splurge. The 10y Bund yields have been on another roundtrip above 2.8% and back, with the curve maintaining a steepening bias.

By Padhraic Garvey, CFA and Benjamin Schroeder

Still playing the 4.25-4.35% trading range for the US 10yr till 2 April

The US consumer is an interesting beast. If we're to believe the latest evidence (from the Conference Board), they are cocker-hoop on current conditions (134.5) but really down in the dumps about the future (65.2). And on balance, not in a bad way, but hanging in just about (92.7 overall vs. 100 as a neutral reference). The 80 area (and below) is where the consumer has really caved. The area between 90 down to 80 is the dodgy zone where things can begin to topple. Basically, we're now teetering but not quite over the edge. What we do know is, if the consumer stops spending, the US economy is in a spot of bother. Enough in this for Treasury yields to re-test lower on Tuesday as a theme, capped off by a decent 2yr auction bolstered by a strong indirect bid and a negative tail (effectively came through secondary; not quite accurate, but that's the way to view it)....

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