The April PCE price index, the Fed's preferred inflation gauge, showed headline inflation at 3.8% annually and core at 3.3%, both matching consensus estimates. The in-line print avoids a hawkish shock but equally provides no relief to those hoping for an early Fed pivot. At 3.3% core, inflation remains materially above the Fed's 2% target with no clear downward momentum visible in the data.
For Armada's traditional repo desk, a 3.3% core PCE sustained reading removes any near-term basis for rate cuts, keeping SOFR anchored at current levels. This steady-state environment is relatively predictable for repo pricing but means term transactions with asset managers and hedge funds need to account for a prolonged high-rate environment. It also reduces pressure on MMF counterparties to extend duration, keeping overnight repo demand elevated.