Bond Market Update

Competing Rate Cut Views

• U.S. Treasuries were unable to hold onto their modest overnight gains, as safe-haven interest faded away with the stock market overcoming opening losses and rallying to new record highs yet again, powered (yet again) by the mega-cap stocks and the AI trade. At the same time, Atlanta Fed President Bostic (non-FOMC voter) and St. Louis Fed President Musalem (FOMC voter) both threw some cold water on the possibility that there will be multiple rate cuts into year-end. Fed Governor Miran (FOMC voter) did not. In a speech today he said that he believes the appropriate fed funds rate is almost two percentage points lower than current policy. Mr. Miran's view did not win out in today's trade, which was fairly lackluster overall and void of any U.S. economic data of note.
• Yield Check:
  • 2-yr: +2 bps to 3.60%
  • 3-yr: +1 bp to 3.58%
  • 5-yr: +1 bp to 3.70%
  • 10-yr: unch at 4.14%
  • 30-yr: unch at 4.76%

• News:
  • The Trump administration announced there will be a $100,000 fee for H-1B visas. The fee is a one-time fee (not per year) and applies to new petitions (not existing H-1B visa holders).
  • Democratic leadership requested a meeting with President Trump ahead of the government fund deadline. President Trump said he would "love to meet with them, but I don't think it's going to have any impact." Politico
  • White House Press Secretary Karoline Leavitt says TikTok's algorithm will be secured, retrained, and operated in the U.S. outside of Bytedance's control; Oracle (ORCL) will serve as Tiktok's security provider; President Trump will sign TikTok deal later this week
  • President Trump will address the United Nations tomorrow and meet with Ukrainian President Volodymyr Zelensky tomorrow. The Hill
  • St. Louis Fed President Musalem (FOMC voter) said in a speech today that he sees limited room for easing further without policy becoming overly accommodative and believes the Fed should tread cautiously
  • Atlanta Fed President Bostic (non-FOMC voter) anticipates only one rate cut this year, inclusive of last week's rate cut, as he continues to worry about elevated inflation
  • The Trump administration blocks U.S. Steel from closing Illinois plant. WSJ
  • PBOC left the one-year loan prime rate and five-year loan prime rate unchanged at 3.00% and 3.50%, respectively, as expected
  • ECB member Stoumaras suggested the rate cut cycle is likely over, barring a big drop in growth or inflation
  • Porsche cited the impact of tariffs, weak EV demand, and a slowdown in China as the basis for cutting its sales return outlook and tempering its operating profit expectations.
  • Check-in operations at airports in London, Berlin, Brussels, and Dublin were disrupted following a cyberattack on Collins Aerospace
  • Cryptocurrency traders had $1.5 bln in bets liquidated. Bloomberg
• Commodities:
  • WTI crude: -0.3% to $62.25/bbl
  • Gold: +1.9% to $3777.80/ozt
  • Copper: +0.2% to $4.64/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1797
  • GBP/USD: +0.3% to 1.3516
  • USD/CNH: unch at 7.1172
  • USD/JPY: -0.2% to 147.71
• The Day Ahead:
  • 08:30 ET: Q2 Current Account Balance (Briefing.com consensus: -$302.1B; prior -$450.2B)
  • 09:00 ET: Fed Vice Chair Bowman (FOMC voter) speech on the economic outlook
  • 09:45 ET: September S&P Global U.S. Manufacturing PMI - Prelim (prior 53.0) and S&P Global U.S. Services PMI - Prelim (prior 54.5)
  • 10:00 ET: Atlanta Fed President Bostic (non-FOMC voter)
  • 12:35 ET: Fed Chair Powell (FOMC voter) speech on the economic outlook
  • 13:00 ET: $69 billion 2-yr note auction