Bond Market Update

Lots of Talk

• U.S. Treasuries are little changed as talk of tariff actions continues to swirl against a backdrop of expectations that the tariff rates won't ultimately be as bad as advertised. Separately, the market has garnered some support from talk that Kevin Hassett is gaining ground as a frontrunner to replace Fed Chair Powell. Other elements in play today include deflationary CPI and PPI readings out of China, speculation that the EU and U.S. are close to a trade deal, the $39 billion 10-yr note reopening at 1:00 p.m. ET, and the release of the FOMC Minutes for the June 17-18 meeting at 2:00 p.m. ET. Participants are anxious to hear the opinions shared on the possible rate cut path.
• Yield Check:
  • 2-yr: -1 bp to to 3.90%
  • 3-yr: +1 bp to 3.88%
  • 5-yr: -1 bp to 3.98%
  • 10-yr: unch at 4.42%
  • 30-yr: unch at 4.94%

• News:
  • The Supreme Court allows the Trump administration to conduct mass firings at federal agencies, which could result in tens of thousands of job losses. NY Times
  • President Trump says seven tariff letters going out this morning and more to follow. Truth Social
  • President Trump supports Russian sanctions legislation sponsored by Senator Lindsey Graham. The bill could get a vote later this month. Politico
  • Senator Lindsey Graham's Russia sanctions legislation will impose a 500% tariff on imports from any country that purchases Russian uranium and oil (USO, XLE, CCJ, NLR). The Hill
  • Kevin Hassett is now a serious contender for Fed Chairman next year. WSJ
  • The EU is reportedly willing to accept a temporary 10% reciprocal tariff while continuing trade discussions with the Trump administration
  • China's CPI for June deflated for the sixth time over the past eight months, pointing to ongoing weakness in consumption, while PPI deflated for the 33rd consecutive month.
  • President Trump delayed tariffs after Treasury Secretary Scott Bessent advised him to give trade deals more time. WSJ
  • Treasury Secretary Scott Bessent says tariffs will generate $300 bln in revenue for the federal government this year. Reuters
  • RBNZ leaves its official policy rate unchanged at 3.25%, as expected
  • China's June CPI -0.1% m/m (expected 0.0%; last -0.2%); 0.1% yr/yr (expected -0.1%; last -0.1%). June PPI -3.6% yr/yr (expected -3.2%; last -3.3%)
• Commodities:
  • WTI crude: +0.2% to $68.47/bbl
  • Gold: -0.7% to $3293.40/ozt
  • Copper: -2.4% to $5.55/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1703
  • GBP/USD: flat at 1.3575
  • USD/CNH: +0.1% to 7.1871
  • USD/JPY: +0.1% to 146.74
• The Day Ahead:
  • 10:00 ET: May Wholesale Inventories (Briefing.com consensus: -0.3%; prior 0.2%)
  • 10:30 ET: EIA Crude Oil Inventories (prior +3.845M)
  • 13:00 ET: $39 bln 10-yr note reopening
  • 14:00 ET: FOMC Minutes for June 17-18 meeting