Insights 
VT 
The S&P Global Manufacturing PMI for June reached 52, surpassing the expected figure of 51. This suggests a positive trend in manufacturing activity.
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Loose readings above 50 generally point to expansion, while levels below that suggest contraction, so June’s print at 52 is quietly affirming. It’s the third consecutive month above the key threshold and the highest since April 2022, which by itself marks a mild acceleration. For context, this advance follows a long patch of factory softness dating back to mid-2022, when rate hikes weighed on order books and inventory cycles distorted normal production flows.
Looking into the composition of the data paints a slightly more nuanced picture. New orders were the standout driver, marking their strongest rise in over a year. Encouragingly, export demand also picked up, though only marginally, hinting that global demand may be stabilising after a shaky showing the past two quarters. What made this print more prominent was the input cost rise, which came unexpectedly, catching many off guard. Although price pressures remain well below 2022 levels, a noticeable uptick in supplier prices may filter into output costs by Q3 if these changes persist.
The Next Steps
Wider implications are already being felt. Yields on the short end edged higher following the data flash, with markets slicing back rate-cut expectations for this calendar year. Swaps now reflect fewer moves by major central banks, and this recalibration is beginning to unwind duration-heavy bets positioned for a looser stance. It may be an inflection point, albeit a subtle one. Meanwhile, yields on the 2-year note reacted more sharply than the 10-year, which in itself hints at short-end sensitivity to macro prints right now. The front of the curve is where reactions feel fastest and can become exaggerated on marginal data beats.
For those assessing near-term volatility, especially in equity-linked contracts and rates markets, the PMI beat combined with firming pricing data raises the chance that momentum positioning will be challenged. Existing long-volatility structures may need rebalancing. This sort of backdrop tends to introduce short bursts of realised volatility, particularly as summer months often trade with tighter volumes and increased noise-to-signal ratios.
The notion that core goods inflation could gather pace again cannot be ruled out entirely. Williamson, summarising this report, flagged supply chain pressures reemerging, albeit in early stages, particularly around materials and upstream components. This could have layering effects on discretionary producers, possibly leading to more protective pricing behaviour in the intermediate term. That means selective pressure on consumer sectors could emerge unannounced.
In our view, tactical sensitivity is required over the coming sessions. Calendar spreads that leaned into a deflationary bias now face growing sensitivity to input-led price shifts. Mechanical re-hedging flows may follow, particularly from larger asset allocators now facing renewed ambiguity in rate trajectories. Synthetic delta from structured equity positions—especially those sensitive to the manufacturing cycle—could also feed into short-term risk adjustments, affecting pricing across the options space.
Also worth watching is how cross-asset volatility correlates shift. If rates volatility climbs while equity vols stay subdued, that divergence could provide edge for dispersion-oriented trades. However, this only holds if correlations across asset classes remain relatively stable, which is not guaranteed in light of recent decouplings between bond and equity benchmarks.
Ultimately, what we want to monitor next are the second-order effects in the futures curve and how implied volatility re-prices over the next two expiry cycles. Any further signs of inflationary persistence in upstream sectors—when paired with activity staying above contraction levels—can lead to steepening risk across gamma-heavy strikes, especially in sectors with high beta to industrial demand.
Our preference, near term, is to remain responsive rather than directional. The data didn’t blow expectations out of the water, but it did shift the balance slightly. For structured positioning, that may be enough to start adjusting marginal exposure, particularly where Vega or convexity exceed appetite.
