Bonds are 'boring' — but they're critical to understand right now

Bond

Economic

Summary:

Though often overlooked, the U.S. bond market is now critical to understand, as rising yields signal economic risks, impact borrowing costs, and reflect growing fears over debt, inflation, and fiscal policy.

Compared to the high-flying mega-cap tickers, the roller-coaster ride of crypto, or the rags-to-riches drama of meme stocks, the US bond market can seem like a sleepy affair.

As millions of people flooded into the stock market over the past few years thanks to Robinhood (HOOD), COVID stimulus payments, and a booming S&P 500, general stock market literacy and an understanding of the things that move markets — Big Tech, earnings and outlooks, and even why economic data moves markets — seem to have made noticeable progress.

Not, however, for bonds. Throughout it all, the bond market and its yields remain the uneaten vegetables on the plate. A chore. Something that is there for safety, not to bring you wealth. Something to be googled later.

But with the slow drumbeat of bond market worries getting louder, now is the time to brush up.

Clearly, the bond market and its relatively slower cadence can mask its huge importance. And its tremors and signals of trouble in recent weeks serve as an important reminder of why a keystone of the global financial system commands so much attention.

Yields on US bonds have been elevated as investors recoil from shifts in trade policy and the prospects of an ever-widening national debt. Yields move in the opposite direction of prices, so as a sell-off intensifies, yields increase, reflecting heightened concerns that buying government debt carries more risk.

Higher yields have a host of consequences that can be felt throughout the economy, as they set the cost of borrowing. High yields mean high mortgage rates, more expensive business loans, and slower economic activity — hence why they're "bad" for stocks and why bonds matter, whether you own them or not.

Governments, massive borrowers themselves, may also find trouble financing the administration of the state if interest rates get high enough. The fear that greater government borrowing might lead to even higher rates and a default crisis has rattled the bond market.

All of which is now at the center of debates in Washington and on Wall Street right now.

"Bond yields — especially Treasury yields — represent the cost of financing for governments." Kathy Jones, Schwab’s chief fixed income strategist, told Yahoo Finance. "When the yields rise, government spending costs go up and vice versa."

Concerns of spiraling US debt were reinforced Wednesday, as President Trump's signature tax bill is expected to increase deficits by $2.4 trillion over the next decade, according to an analysis by the nonpartisan Congressional Budget Office. Which is why the bond market — and Elon Musk — are blowing a raspberry.

All the while, investors have also been behaving in ways that challenge the status of US Treasurys as a safe-haven asset. Bonds typically form part of an investment strategy that offsets riskier assets, like stocks, with more stable, but modest returns, which is why you own them if you have a target-date fund in your 401(k). Underpinning the reliability of bonds is the reputation of the US government: its institutions, economic stability, and integral role in global trade. Hence the controversy, once again.

With investors keeping their distance from bonds during heightened volatility, it's clear how perceptions are shifting.

"The recent volatility in the bond market reflects the combination of policies that are working at cross purposes," Jones said. "Fiscal policy is expansive at a time when the economy is growing at a relatively healthy rate and inflation is still far above the Fed’s 2% target. Meanwhile, tariffs and anti-immigration policies could mean slower growth and higher inflation, but they are being applied inconsistently. The market is caught between these forces and struggling to find a coherent path."

And until that happens, bonds will continue to be in focus.

Source: finance.yahoo

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Glendon

Economic

Stocks

The Nasdaq compositeended Wednesday up for a third-straight day at 19,460.49. The prevailing trend has the tech-laden index aiming for key chart hurdles, including its record highs.

Indeed, thanks to a resurgence in tech, the composite has now advanced 27.5% from its April 8 close, and as much as 32% from its April 7 intraday low. This puts the IXIC in positive territory for the year, up about 0.8%, and up 12.5% quarter-to-date.

With this, it's now down just 3.54% from its December 16 record closing high, and 3.68% from its December 16 record intraday high.

Of note, tech is the best performing S&P 500 indexsector so far this quarter, up about 15.5%. Chipsare doing even better with a 17.9% QTD rise. The NYSE FANG+ index, which provides exposure to 10 of today's highly traded tech giants, (including six of the Mag 7 stocks), has surged 22.3% QTD.

In fact, this week, NYFANG has completely erased its February-April collapse, and is hitting fresh record highs.

Meanwhile, the composite is now nearing the resistance line from its record intraday high, which now resides around 19,820, and presents a tough hurdle in itself:

The early 2025 highs were at 20,110.12 and 20,118.61. The December 16 record close was at 20,173.89 and the record intraday high was at 20,204.58.

Significant support resides in the 18,599.69-18,068.90 area. This zone includes the May 23 low at 18,599.69, the 200-day moving average (DMA) and the Fibonacci-based 233-DMA, which now reside in the 18,495-18,365 area. The March 25 high was at 18,281.13, and the May 12 weekly gap requires a fall to 18,096 for a fill (and 18,068.90 daily basis).

On weakness, bulls would look for this zone to provide fertile ground for a resumption of the advance. The rising 50-DMA ended Wednesday around 17,768.

Source: Reuters

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Adam

Stocks

stock index futures were muted on Thursday as investors looked ahead to the monthly jobs report to gauge the impact of President Donald Trump's trade policies on the labor market and the Federal Reserve's interest rate trajectory.

Following Wednesday's weaker-than-expected U.S. private jobs and services sector data, Friday's non-farm payrolls report will come under sharp scrutiny as investors fear that Trump's erratic trade policies will drive a slowdown in economic growth.

"The numbers weren't so bad as to revive fears about a recession ... investors were reluctant to over-interpret one day's data, not least given the big test is coming tomorrow with the U.S. jobs report," Jim Reid, global head of macro and thematic research at Deutsche Bank, said in a note.

"But, the data led investors to price in more rate cuts this year ... and there's growing confidence that we'll see the first rate cut by September."

The data comes ahead of the Fed's policy decision later this month, where policymakers are widely expected to hold interest rates. Traders currently see at least two rate cuts by the end of this year, as per pricing in money markets.

Despite continued calls from Trump to slash interest rates, Fed Chair Jerome Powell has opted to stand pat so far, awaiting further data to help dictate the policy decision as tariff volatility prevails.

On Wednesday, Washington's doubled tariffs on imported steel and aluminum came to effect and it also marked Trump's deadline for trading partners to make their best offers to avoid other punishing import levies from taking effect in early July.

Investors focused on tariff negotiations between Washington and trading partners, with Trump and Chinese leader Xi Jinping expected to speak sometime this week as tensions simmer between the world's two biggest economies.

U.S. equities rallied sharply in May, with investors boosting the S&P 500 index and the tech-heavy Nasdaq to their biggest monthly percentage gain since November 2023, thanks to a softening of Trump's harsh trade stance and upbeat earnings reports.

The S&P 500 remains nearly 3% below record highs touched in February.

Data scheduled for Thursday include initial jobless claims and international trade data at 08:30 a.m. ET.

U.S. central bank officials including Fed Board Governor Adriana Kugler, Fed Kansas City President Jeffrey Schmid and Fed Philadelphia President Patrick Harker are scheduled to speak later in the day.

At 6:58 a.m. ET, Dow E-minis were up 15 points, or 0.04%, S&P 500 E-minis rose 2.25 points, or 0.04%, and Nasdaq 100 E-minis were higher 9.75 points, or 0.04%.

Most megacap and growth stocks were mixed in premarket trading. Tesla fell 1.8%.

Shares of MongoDB jumped 16.4% after the software company gave an upbeat annual forecast and reported quarterly results above estimates.

Chewy fell 2.6% after Jefferies downgraded the online pet products retailer to "hold" from "buy".

source : Reuters

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Warren Takunda

Economic

China–U.S. Trade War

The European Central Bank cut its benchmark interest rate for an eighth time, aiming to support businesses and consumers with more affordable borrowing as U.S. President Donald Trump’s trade war threatens to slow already tepid growth.

The bank’s rate-setting council cut interest rates by a quarter of a point Thursday at the bank’s skyscraper headquarters in Frankfurt. Analysts expected a cut, given the gloomier outlook for growth since Trump announced a slew of new tariffs April 2 and subsequently threatened to impose a crushing 50% tariff, or import tax, on European goods.

The bigger question remains how far the bank will go at subsequent meetings. Bank President Christine Lagarde’s remarks at a post-decision news conference will be scrutinized for hints about the bank’s outlook.

Much depends on whether trade tensions can be resolved through negotiations, the bank indicated. “A further escalation of trade tensions over the coming months would result in growth and inflation being below the baseline projections,” the bank said in its accompanying monetary policy statement “By contrast, if trade tensions were resolved with a benign outcome, growth and, to a lesser extent, inflation would be higher.”

While the trade war and the uncertainty that goes with it is holding back growth, the ECB said the economy should get additional stimulus from higher government spending on defense and infrastructure. European governments are stepping up plans for defense purchases to counter Russia and its invasion of Ukraine. The spending boosts arrive amid concern that the U.S. is no longer a fully committed ally in support of Ukraine.

U.S. Defense Secretary Pete Hegseth did not attend a recent meeting of allied nations created to organize Ukraine’s military aid. It was the first time the U.S. was not present since the group was set up three years ago. Hegseth’s predecessor, Lloyd Austin, created the group after Russia launched all-out war on Ukraine in 2022.

Given the different possible outcomes the bank said that it was “not committing to a particular rate path” for future policy meetings.

Thursday’s decision took the bank’s benchmark rate to 2%, down from a peak of 4% in 2023-24.

The bank raised rates to suppress an outbreak of inflation in 2021-23 that was triggered by Russia’s invasion of Ukraine, and by the rebound from the pandemic. But as inflation fell, the bank shifted gears toward supporting growth by lowering rates. With inflation now down to 1.9%, below the bank’s target of 2%, analysts say the bank has room to take rates even lower to support growth.

Trump announced a 20% tariff, or import tax, on goods from the European Union. He later threatened to raise the tariff to 50% after expressing dissatisfaction with the progress of trade talks with the EU’s executive commission, which handles trade issues for the 27-member union. Trump and the EU’s executive commission have agreed to suspend implementation and any retaliation by the EU until July 14 as negotiators seek to reach agreement.

Trump added more disruption this week by suddenly increasing a 25% tariff on steel imports to 50% for all countries except for the U.K. The threat of even higher tariffs has raised fears that growth will underperform already modest forecasts. The EU’s executive commission lowered its growth forecast for this year to 0.9% from 1.3% on the optimistic assumption that the 20% tariff rate can be negotiated down to no more than 10%.

Source: AP

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Adam

Commodity

Crude Oil News Today: Supply-Demand Mismatch Pressures Crude Rally

Daily Light Crude Oil Futures

Light crude futures edged higher Thursday, but recent momentum is fading as the market runs into technical resistance and demand concerns mount. Prices remain above the 50-day moving average at $62.10, a level that initially sparked buying earlier this week.

However, the rally stalled at $63.96—just shy of key resistance at $64.19 and $64.40. A breakout above those levels could open the path toward the 200-day moving average at $66.51. Without follow-through, the market risks drifting into a lower pivot range between $62.59 and $59.51.

Saudi Price Cuts and OPEC+ Supply Moves Weigh on Sentiment

Crude came under pressure midweek after Saudi Arabia reduced its July selling prices to Asia to the lowest in nearly two months. While the cuts were milder than expected, they reflect soft demand in a region typically driving summer buying strength.

The timing follows OPEC+’s decision to raise July output by 411,000 barrels per day, signaling that major producers are prioritizing market share even as demand signals waver. This coordinated action from Saudi Arabia and Russia is seen as an attempt to discipline over-producers and tighten control of global supply dynamics.

Refiners Drive Crude Draw, But Fuel Demand Falls Short

Weekly EIA data delivered a mixed message. U.S. crude stocks dropped by 4.3 million barrels to 436.1 million, outpacing expectations and driven by a strong increase in refinery runs. Utilization rose to 93.4%, suggesting refiners are preparing for peak seasonal demand.

Yet product supplied of gasoline, a reliable demand indicator, unexpectedly fell by 1.2 million barrels per day to 8.3 million—raising red flags. This disconnect between refinery activity and end-user demand triggered large builds in gasoline (+5.2 million barrels) and distillate inventories (+4.2 million barrels), undermining the bullish signal from the crude draw.

U.S. Demand Underperforms Despite Summer Driving Season

Despite the post-holiday kickoff to the U.S. driving season, demand remains sluggish. The gasoline supply drop came at a time when consumption typically rises.

This underperformance contributed to a flat intraday price reaction, with U.S. crude last quoted near $63.07. Analysts point to the possibility that refiners overestimated near-term demand, which may keep inventories elevated in the short run.

Outlook: Bearish Bias Until Demand Aligns with Supply

The market is caught between tightening crude supplies and underwhelming fuel consumption. Without a recovery in gasoline demand to match refinery output, the risk of oversupply in refined products remains high.

Unless price action breaks above $64.40 on strong volume and demand metrics improve, crude futures face a bearish outlook near term.

source : fxempire

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Michelle

Economic

Forex

The number of Americans filing new applications for unemployment benefits last week increased for a second straight week, pointing to softening labor market conditions amid mounting economic headwinds from tariffs.

Initial claims for state unemployment benefits rose 8,000 to a seasonally adjusted 247,000 for the week ended May 31, the Labor Department said on Thursday. Economists polled by Reuters had forecast 235,000 claims for the latest week.

Companies are generally hoarding workers after struggling to find labor during and after the COVID-19 pandemic, but mounting uncertainty because of President Donald Trump's tariffs is forcing some to layoff workers.

The Federal Reserve's Beige Book report on Wednesday showed "comments about uncertainty delaying hiring were widespread," noting that "all districts described lower labor demand, citing declining hours worked and overtime, hiring pauses and staff reduction plans. It said while some districts reported layoffs in certain sectors, "these layoffs were not pervasive."

An Institute for Supply Management survey also made similar observations, reporting steady employment in the services sector in May, but also pointing out that "higher scrutiny is being placed on all jobs that need to be filled."

Economists expect claims this month will break above their 205,000-243,000 range for 2025, mostly driven by difficulties adjusting the data for seasonal fluctuations and following a similar pattern in recent years.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, slipped 3,000 to a seasonally adjusted 1.904 million during the week ending May 24, the claims report showed. The elevation in the so-called continuing claims aligns with consumers' ebbing confidence in the labor market.

A separate report from global outplacement firm Challenger, Gray and Christmas showed U.S-based employers announced 93,816 job cuts in May, down 12% from April. Layoffs were, however, 47% higher from a year ago.

The claims data have no bearing on the Labor Department's closely watched employment report for May, scheduled to be released on Friday, as it falls outside the survey period.

Nonfarm payrolls likely increased by 130,000 jobs last month after advancing by 177,000 in April, a Reuters survey of economists showed. The unemployment rate is forecast being unchanged at 4.2%.

Source: Reuters

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Adam

Stocks

European stocks traded higher on Thursday ahead of an expected interest-rate cut by the European Central Bank.

Investors have fully priced in a 25 basis-point cut, bringing the deposit rate to 2%, and will be looking for clues on longer-term monetary policy.

Lazard Asset Management expects rates to be reduced to 1.5% by year-end "given a more aggressive U.S. trade posture against the European Union".

The ECB is unlikely to give a clear signal for its July meeting, with risks leaning toward signaling a pause , Pictet Wealth Management said.

In morning trade, the DAX reached a new record intraday high in a session with modest but broad-based gains across major European stock indexes.

Economic Insight

A recovery in German industry remained underway, ING said, after its factory orders unexpectedly rose at the start of the second quarter.

Rising order books over the previous three months had been pinned to a rush from U.S. importers to stock up ahead of tariffs, but that now looks only part of the story.

Stocks to Watch

UBS Group looked set to face stricter capital requirements due to new Swiss banking rules and this could put its returns under pressure, Morningstar said.

BP continues to expect that half of its target to boost free cash flow 20% by 2027 will be achieved in 2025, Citi said.

Bayer's strong start to the year and signs of a recovery in its pharmaceutical business suggests earnings expectations might have bottomed out, according to Goldman Sachs.

Forex:

The euro rose but a significant reduction of ECB inflation forecasts would likely limit its gains against a weaker dollar, XTB said.

Recent weak eurozone inflation data mean inflation forecasts are expected to be reduced along with interest rates.

The euro has gained ground against the dollar over the past month, despite European bond yields lagging the U.S.

The dollar edged slightly higher against a basket of currencies in early European trade but remained weak and close to six-week lows.

The greenback fell Wednesday after weak U.S. ADP private payrolls data, while trade-policy uncertainty also weighed on the U.S. currency.

"Interestingly, the U.S. dollar is one of the few assets reflecting trade pessimism," Swissquote Bank said.

Bonds:

Treasury yields were stabilizing after sharp declines Wednesday prompted by weak data.

The falls were prompted in part by a below-consensus ADP jobs report, which put Friday's nonfarm payrolls data under even bigger scrutiny than usual.

However, further signs of weakness in the labor-market data were needed before the Federal Reserve could cut interest rates, Metzler said.

The 10-year Bund yield was flat shortly after the open.

France's EUR10 billion to EUR12 billion issuance of long-dated government bonds on Thursday looked set to weigh on Bunds in the earlier part of the session, Commerzbank Research said.

However, this potential rise in Bund yields could be used for tactical long positions ahead of the ECB meeting.

Significant falls in Treasury yields on Wednesday following weak data left German Bunds unfazed.

Energy:

Oil prices edged higher after slipping in the previous session amid persistent concerns over excess supply and softening demand.

A bigger-than-expected drawdown in U.S. crude inventories was offset by builds in gasoline and diesel stocks, reflecting weaker demand in the world's top oil consumer.

Meanwhile, fears of a supply glut continue to weigh on sentiment after Bloomberg reported Saudi Arabia was seeking another big production increase at next month's OPEC+ meeting.

European natural gas prices rose in early trade as traders focus on replenishing storage ahead of the winter.

Supply tightened as flows from Norway--Europe's largest single supplier--declined due to a new round of planned maintenance.

Metals:

Gold futures slipped but held near monthly highs. The precious metal had rallied in the prior session as weaker-than-expected U.S. economic data raised hopes for rate cuts, ANZ Research said.

Lower hiring and a contraction in U.S. services activity have raised expectations of monetary policy loosening to avoid a recession.

At the same time, safe-haven demand for gold has also been prominent, ANZ added.

State Street Global Advisors said the gold market had likely transitioned to a higher price regime north of $3,000/oz for the rest of this year.

"Our bull case scenario (30% probability) sees gold approaching $4,000/oz over the next six to nine months under certain macroeconomic conditions, including stagflation and accelerated de-dollarization."

Comex futures ' bullish momentum was re-accelerating, based on the daily chart. RHB Retail said futures may extend gains toward $3,500/oz if a bullish breakout above resistance at $3,400/oz occurs.

EMEA HEADLINES

Wise Shares Rise on Move to Switch Main Listing to U.S.

Wise shares rose after the company said it plans to transfer its main listing to the U.S., the biggest market for the company's products, dealing a further blow to the London bourse, which has been suffering over the past couple of years.

Shares were up 63 pence, or 5.8%, at 11.46 pounds in early morning European trading. They are currently up 2.25% over the year to date.

Germany's Leader Has a Message for Trump: We Need You, but You Also Need Us

Germany's new chancellor will have a mission when he meets President Trump in the Oval Office for the first time Thursday: keeping him invested in the fate of Europe.

Friedrich Merz is the latest in a string of European leaders who have traveled to the White House in recent weeks in a coordinated campaign to cajole Trump into backing new sanctions on Russia, striking a trade deal with the European Union and reaffirming America's security commitment to the region.

Global Markets Are On a Tear. These Stocks in Europe and Japan Are Still Bargains.

Sarah Ketterer hunts the globe for out-of-favor value stocks. It's a strategy that requires patience-not least in the past few years, when the market relentlessly rewarded U.S. growth stocks.

That may be changing. Policy uncertainty in Washington is weighing on the U.S. market while foreign shares leap ahead. The S&P 500 is up just 0.9% this year while the MSCI EAFE index of developed countries has vaulted ahead 17%. A weaker dollar is fueling gains for foreign stocks when translated into U.S. currency, but other tailwinds are helping.

GLOBAL NEWS

Why the S&P 500 Could Hit 6200 Despite a 5% Bond Yield

The S&P 500 could hit 6200-a level never seen before-even if the yield on the 10-year Treasury note reaches 5%.

The general understanding is that higher yields make stocks less attractive, because companies' projected earnings are worth less when measured against these higher rates. The higher yields go, the more favorable Treasury bonds' guaranteed returns look, such as the almost 5% available on the 10-year in 2023.

China Services Sector Picks Up Slightly Despite Lower Orders

A private gauge of China's services sector signaled that activity picked up in May, despite a renewed fall in new export orders.

The Caixin services purchasing managers index rose to 51.1 last month from 50.7 in April, Caixin Media and S&P Global said Thursday. That marked the 29th month above the 50-mark separating expansion from contraction.

Cracks Are Appearing in the Tariff-Era Economy. Think Stagflation.

People watching the U.S. economy received a jolt of reality Wednesday through feedback from the men and women closest to its key growth engine, and from company bosses who manage the country's 170 million-strong workforce.

The message wasn't great. The latest data suggest slowing economic growth with the potential for faster inflation. It could be a toxic combination in that the inflation risk could make it harder for the Federal Reserve to lower rates to prop up the economy as it normally would.

Trump Bans Citizens of 12 Countries From Traveling to U.S.

WASHINGTON-President Trump on Wednesday signed a sweeping travel ban on 12 countries, largely in the Middle East and Africa, and introduced more-limited travel restrictions on seven others, reintroducing a controversial immigration policy that came to define the early days of his first term.

The ban will completely bar travel to the U.S. by citizens of Afghanistan, Myanmar, Chad, the Republic of the Congo, Equatorial Guinea, Eritrea, Haiti, Iran, Libya, Somalia, Sudan and Yemen.

Big Cuts at the Education Department Stall Civil-Rights Cases

WASHINGTON-Much of the nation's apparatus for rooting out civil-rights violations in schools has ground to a standstill because of recent staffing cuts, raising alarm bells across the political spectrum.

The Education Department's civil-rights office investigates and seeks resolution on thousands of complaints involving students with disabilities and those facing discrimination, aiming to avoid the disruption of a student's educational experience. But parents, lawyers and conservative activists say staffing shortages have made it difficult for the office to conduct these complex investigations in an adequate amount of time.

Trump Orders Investigation Into Biden's Actions as President

President Trump ordered an investigation into Joe Biden's actions as president, including his use of an autopen, alleging that his predecessor's aides hid evidence of what he called Biden's "serious cognitive decline."

Trump ordered the White House counsel, in consultation with the attorney general, to review whether Biden's team conspired to deceive the public about his mental state and unlawfully exercise presidential authority. Trump alleged that "Biden's aides abused the power of Presidential signatures through the use of an autopen to conceal Biden's cognitive decline."