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US ISM Improves But Supply Issues Remain

  • The US ISM manufacturing survey in Feb saw a welcome combination of stronger than expected orders (led by new exports) and production whilst the price component dipped slightly.
  • That said, various sectors continued to report the common theme of strong demand and not enough supply. There appears to be no let up in semiconductors shortages either, key for many industries including autos which have been driving inflation, which entered the 15th month of short supply.
  • Lower than expected prices (75.6 vs 77.5 cons) helped Treasuries firm on the release as they more than offset a selling off on higher price pressures in the finalised Markit PMI just beforehand, but moves have been swallowed up on the day’s broader rally, with front-end and belly yields down 10-11bps, 10Y yields down 8bps and 30Y down 4bps.

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