Bond Market Update

Sitting Tight

• U.S. Treasuries traded in a tight range, staying calm once again despite more tariff letters being sent announcing higher tariff rates starting August 1. The latest recipients were Mexico and the EU, both of which will face a 30% tariff rate if they cannot work out better trade terms for the U.S. by then. Neither Mexico nor the EU overreacted to these letters, noting simply that they will keep working on negotiations with the U.S. in front of the deadline. Market participants seemed to appreciate that approach, which fits the prevailing view that these higher tariff rates are unlikely to stick. Beyond that, there was a wait-and-see disposition today ahead of the release of the June CPI report on Tuesday, which will have some outsized influence on the market's views on inflation and monetary policy. There was no U.S. economic data of note today.
• Yield Check:
  • 2-yr: -1 bp to to 3.90%
  • 3-yr: -1 bps to 3.87%
  • 5-yr: -1 bp to 3.98%
  • 10-yr: +1 bp to 4.43%
  • 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 Economic Advisor Kevin Hassett is now a leading contender for Fed Chair in 2026 when Jerome Powell's term expires, according to Washington Post
  • U.S. to impose secondary tariffs on Russia of up to 100%, starting September 1, if Russia hasn't agreed to ceasefire or end of war with Ukraine -- CNBC
  • 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: -2.3% to $66.89/bbl
  • Gold: -0.1% to $3359.50/ozt
  • Copper: -0.9% to $5.55/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1668
  • GBP/USD: -0.5% to 1.3431
  • USD/CNH: unch at 7.1720
  • USD/JPY: +0.2% to 147.74
• The Day Ahead:
  • 08:30 ET: June CPI (Briefing.com consensus: 0.2%; prior 0.1%) and Core CPI (Briefing.com consensus: 0.3%; prior 0.1%)
  • 08:30 ET: July Empire State Manufacturing (Briefing.com consensus -11.6; prior -16.0)