The Bureau of Economic Analysis reported March PCE core inflation at 3.2%, above consensus, alongside Q1 GDP growth of 2%, a disappointment driven partly by the Iran conflict's impact on oil prices and supply chains. The combination of sticky inflation and slowing growth presents a stagflationary signal that limits the Fed's ability to ease policy even amid White House pressure. This is the first major macro print under Chair Warsh's watch.
For Armada's traditional repo desk, a higher-for-longer SOFR environment compresses net interest margin on longer-dated repos and raises rollover costs for hedge fund and asset manager counterparties. If growth continues to disappoint while inflation stays elevated, counterparties may reduce duration and concentrate in overnight or short-term repos, increasing Armada's reinvestment frequency risk. The data reinforces the need for rate sensitivity analysis across the book.