Bond Market Update

Staying Calm

• U.S. Treasuries have maintained a strikingly calm disposition in the wake of the news that President Trump has sent letters to Mexico and the EU indicating their tariff rates will jump to 30% starting August 1 if they do not work out better trade terms with the U.S. before then. The calm is a reflection of the market's belief that lower tariff rates will be negotiated and won't do any real economic harm. The market's calm could be tested later this week, though, as it gears up for a large slate of influential data that includes the June CPI, PPI, Retail Sales, and Housing Starts reports. There isn't any economic data of note today for the U.S., but China posted better-than-expected export figures for June and its first increase in imports since December 2024.
• Yield Check:
  • 2-yr: -2 bps to to 3.89%
  • 3-yr: -1 bps to 3.87%
  • 5-yr: -1 bp to 3.98%
  • 10-yr: unch at 4.42%
  • 30-yr: +1 bp to 4.97%

• News:
  • White House NEC Director Kevin Hassett says tariffs will go into place if President Trump doesn't get a deal that is "good enough." He said President Trump has authority to fire Fed Chairman Jerome Powell for cause amid criticism over Fed building cost overruns. ABC News
  • EU plans to keep tariff countermeasures on hold until August. Reuters
  • Mexican President Claudia Sheinbaum confident she can reach a deal with President Trump to avoid tariffs. Bloomberg
  • Iran mulling offer to restart nuclear talks. Bloomberg
  • White House Trade Advisor Peter Navarro says goods imported under USMCA trade deal will not be subject to tariffs. Bloomberg
  • Economists expecting stronger job growth and lower inflation as tariffs were less costly than feared. WSJ
  • EU plans to talk with other nations impacted by U.S. tariffs. Bloomberg
  • House will vote this week on stablecoin legislation that Senate already passed. Politico
  • China's June exports 5.8% yr/yr (expected 5.0%; last 4.8%) and June imports 1.1% yr/yr (expected 1.3%; last -3.4%); June new loans CNY2240.0B (expected CNY 1960.0B; last CNY620.0B)
• Commodities:
  • WTI crude: +1.4% to $69.42/bbl
  • Gold: +0.6% to $3382.60/ozt
  • Copper: -1.4% to $5.53/lb
• Currencies:
  • EUR/USD: flat at 1.1696
  • GBP/USD: -0.1% to 1.3485
  • USD/CNH: -0.1% to 7.1677
  • USD/JPY: -0.1% to 147.25
• The Day Ahead:
  • There is no U.S. economic data of note today