Hopes For Fed Rate Cuts Keep US Treasury Yield Views Low Ahead Of Supply Deluge

Economic

Central Bank

Summary:

U.S. Treasury yields are set to decline further according to bond strategists who are clinging to expectations the Federal Reserve resumes cutting interest rates after pausing for more than half a year even as dealers are set to underwrite a deluge of new supply.

A slight majority now expect another sell-off in longer-dated bonds, the maturities most at risk, by the end of this month.

Concerns that President Donald Trump’s tax-cut and spending bill will add trillions of dollars to an already-staggering $36.2 trillion debt pile by 2034, along with tariff brinkmanship already have many holders of U.S. assets scrambling for the exit.

The rising "term premium" – what investors demand as compensation for holding longer-dated debt – leaves the market more vulnerable, particularly among foreign investors, ahead of upcoming Treasury bond auctions.

"The amount of debt we need to issue keeps rising and there doesn't appear to be anyone in Washington on either side that really has a plan to bring down deficits and address our fiscal situation," said Collin Martin, fixed income strategist, Schwab Center for Financial Research.

"That'll weigh on the long end of the curve where we need to see yields rise a bit to attract that marginal buyer."

Global sovereign bond yields have mostly risen in tandem over the past two months. A rapid sell-off in benchmark U.S. 10-year Treasuries in April pushed the yield up around 60 basis points.

That yield, which rises when prices fall, has since steadied, oscillating around 4.50%.

Median forecasts from nearly 50 bond strategists in a June 6-11 Reuters survey, most from dealers and sell-side firms, predicted the 10-year yield would decline a modest 13 bps to 4.35% in three months and to 4.29% in six from its current 4.48%.

Despite predicting a decline, more than half upgraded their forecasts from a May survey with many flagging the risk of yields moving higher.

"The 10-year will probably trade range-bound for a while between 4-4.50% and maybe even rise a little bit further, particularly given deficit concerns. The yield curve should continue to steepen as short-term yields drift gradually lower as the Fed cuts rates one or two more times by year-end," Schwab's Martin added.

The more interest rate-sensitive 2-year yield was forecast to decline a slightly steeper 17 bps to 3.85% in three months and to 3.73% by end-November, the survey showed.

Most economists polled by Reuters predict two or fewer rate cuts this year while rate futures are currently pricing two.

Source: Yahoo Finance

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Adam

Commodity

WTI Futures Eye Breakout Above 200-Day Moving Average

Light crude futures surged early Wednesday, building on Tuesday’s gains but falling just short of the 200-day moving average at $66.45. Prices touched $66.28 before retreating slightly into the close, with bulls now eyeing a clean break above technical resistance for confirmation of sustained upside.

If sellers reassert control, traders are watching $63.09 as a nearby support pivot. A decisive move above $66.45 could open the door toward the next major upside target near $68.21.

OPEC+ Output Rises, But Domestic Demand May Absorb Extra Supply

OPEC+ plans to raise production by 411,000 barrels per day in July, marking a fourth consecutive monthly increase. Yet analysts say the impact on global supply could be muted. Saudi Arabia and other OPEC+ members are likely to see increased domestic demand during summer months, helping absorb the added barrels. According to Capital Economics, this internal consumption may support prices in the near term by offsetting the supply increase.

U.S.-China Trade Truce Lifts Risk Appetite—But Demand Questions Remain

WTI’s seven-week high reflects renewed risk appetite following U.S.-China trade talks. The two sides have agreed on a framework to revive their trade truce and ease restrictions on rare earth exports, boosting sentiment.

As the world’s top two oil consumers, easing tensions reduces downside price risk. However, PVM’s Tamas Varga cautioned that traders remain uncertain about how much this progress will actually translate into stronger economic activity or higher oil demand.

Geopolitical Risk Premium Builds on Iran Threats

Geopolitical tensions are also back in focus. President Trump voiced skepticism about Iran’s willingness to curb uranium enrichment, while Tehran threatened to strike U.S. bases in the region if talks break down. The hardening rhetoric adds a premium to prices, with traders pricing in the potential for supply disruptions in the event of a broader conflict.

Crude Oil Inventory in Focus Ahead of EIA Report

Ahead of the official EIA inventory release, preliminary API data showed a 370,000-barrel draw in U.S. crude stocks last week. A confirmed decline would provide fresh support for prices, reinforcing the bullish tone heading into midweek trade. All eyes remain on the EIA figures for confirmation. Traders are looking for a draw of 2.4 million barrels.

Oil Prices Forecast: Bullish Bias Building Above Key Resistance

With support from geopolitical tensions, easing trade concerns, and stable demand fundamentals, the outlook for crude remains bullish—provided WTI can close above its 200-day moving average. A confirmed breakout could invite fresh buying, setting up a run toward the $68.00 handle. Failure to hold current gains, however, risks a pullback to the $63.00 area.

Source: fxempire

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Adam

Economic

China–U.S. Trade War

Here are five key things investors need to know to start the trading day:

Anticipation

Stocks rose on Tuesday as investors hoped for progress out of trade talks between the U.S. and China. The S&P 500 and Nasdaq Composite both notched their third straight session of gains, rising 0.55% and 0.63%, respectively. The Dow Jones Industrial Average also climbed 105.11 points, or 0.25%. All eyes are on May’s consumer prices report, set for release Wednesday morning, for the latest read on inflation. The highly anticipated CPI report — combined with Thursday’s PPI report and two Treasury auctions this week — will be a critical test for the bond market. Follow live market updates.

Shake on it

Representatives from the U.S. and China on Tuesday evening said that the two countries reached an agreement on trade following two days of negotiations in London. U.S. Commerce Secretary Howard Lutnick told reporters that the two sides “have reached a framework to implement the Geneva consensus and the call between the two presidents.” Both countries had accused each other of violating the agreements they made in Switzerland in May — which included a 90-day suspension of reciprocal tariffs on each other’s goods — but a phone call between Presidents Trump and Xi last week appeared to stabilize the relationship. Participants of the London talks said they will now return to their respective countries to get Trump’s and Xi’s approval of the framework before implementing it.

Zuckerberg’s $14 billion bet

Frustrated by Meta’s place in the AI race, CEO Mark Zuckerberg is hiring Scale AI co-founder Alexandr Wang to help achieve the tech giant’s artificial intelligence ambitions, people familiar with the matter told CNBC. Meta is finalizing a deal to invest $14 billion into Wang’s data-labelling and annotation startup, which has helped major firms like OpenAI, Google and Microsoft

prepare the data they use to train their AI models. The decision to convince Wang to join Meta is uncharacteristic for Zuckerberg — who typically hires loyalists for top positions — but underscores the CEO’s belief that outside talent may be best suited to jump-start Meta’s AI capabilities, the people said.

Switching lanes

General Motors will invest $4 billion in three U.S. plants where it plans to add the assembly of some of its Mexican-produced vehicles, the company announced Tuesday. The automaker said the ten-figure investment will bring the production of the Chevrolet Blazer to its Spring Hill Assembly in Tennessee and the production of the Chevrolet Equinox to its Fairfax Assembly in Kansas. Both models are currently assembled at the Ramos Arizpe plant in Mexico. And while production of the Blazer will fully move to the U.S., some production of the Equinox is expected to continue in Mexico, a source familiar told CNBC. The move by GM comes as negotiations between the Trump Administration and Mexican leaders have yet to yield new trade agreements. President Trump’s 25% tariffs on imported vehicles took effect in April, and his 25% tariffs on imported auto parts took effect in May.

Order for AI?

Your next Starbucks order might be brewed with the help of artificial intelligence. The coffee chain on Tuesday announced that it will roll out a generative AI assistant created with Microsoft Azure’s OpenAI platform at 35 stores this month. Tablets equipped with so-called “Green Dot Assist” will provide baristas with answers to a range of questions, from how to make a certain drink to how to fix equipment, in an effort to simplify their jobs and speed up service. CEO Brian Niccol has made cutting service times a priority since taking the helm last year, setting a goal of less than four minutes per order as he tries to reverse slumping U.S. sales. A broad launch of the AI assistant is planned for the fall.

source : cnbc

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Thomas

India–Palestine conflict

The NY Post has published a new Trump interview focused on apparently stalled Iran nuclear deal efforts which resulted in a surge in oil prices.

The President said in the interview he's getting "less confident" about ongoing nuclear negotiations with Iran, soon after which oil rose as well as benchmark treasury yields and gold, as investors weigh the possibility of US-Iran nuclear talks falling apart.

Trump was asked whether he thinks the Islamic Republic will agree to shut down its nuclear program. "I don’t know. I did think so, and I’m getting more and more — less confident about it," he responded.

"They seem to be delaying, and I think that’s a shame, but I’m less confident now than I would have been a couple of months ago," Trump continued. "Something happened to them, but I am much less confident of a deal being made."

Then the question was raised by the Post, "what happens then?" To which Trump responded:

“Well, if they don’t make a deal, they’re not going to have a nuclear weapon,” Trump answered. “If they do make a deal, they’re not going have a nuclear weapon, too, you know? But they’re not going a have a new nuclear weapon, so it’s not going to matter from that standpoint.

“But it would be nicer to do it without warfare, without people dying, it’s so much nicer to do it. But I don’t think I see the same level of enthusiasm for them to make a deal. I think they would make a mistake, but we’ll see. I guess time will tell.”

On the question of China's influence on Tehran, Trump described, "I just think maybe they don’t want to make a deal. What can I say?” he said. “And maybe they do. So what does that mean? There’s nothing final."

Via AFP

On Tuesday Trump acknowledged in a Fox News interview that Iran is becoming "much more aggressive" in these negotiations. And the day prior he had told reporters that the Iranians are "tough negotiators" and sought to clarify that he would not allow Tehran to enrich uranium on its soil, after some recent contradictory reports suggested the White House had backed off this demand.

Washington is awaiting a formal response from the Islamic Republic, which is expected to submit a counter-proposal in the coming days, just ahead of an expected sixth round of indirect talks with the US in Muscat, Oman, slated for Sunday, June 15.

More geopolitical headlines via Newsquawk:

Iranian Foreign Minister "As we resume talks on Sunday, it is clear that an agreement that can ensure the continued peaceful nature of Iran's nuclear program is within reach—and could be achieved rapidly.". Thereafter, US President Trump is less confident about the Iran deal, according to a New York Post podcast interview.
Iranian Foreign Minister says "Trump's position on Iran's possession of nuclear weapons could form the basis of the agreement ", according to Al Arabiya.
US Secretary of State Rubio said the US condemns sanctions imposed by the governments of the UK, Canada, Norway, New Zealand, and Australia on two sitting members of the Israeli cabinet. Rubio also stated that Israel sanctions do not advance US-led efforts to achieve a ceasefire, bring all hostages home, and end the war, while he added that the US urges a reversal of the sanctions.
"Iran's Defense Minister warns on US officials' threats of conflict should negotiations falter: We hope for successful talks, but if conflict is imposed on us, Iran will respond decisively, targeting all US bases in host countries.", via Journalist Aslani.
"Iran successfully tested a missile equipped with a two-ton warhead last week", according to Iran International citing the Iranian Defense Minister.

Source: Zero Hedge

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Adam

Stocks

Economic

Futures for the Dow Jones Industrial Average and other major stock indexes reversed higher Wednesday, as President Donald Trump called the trade deal with China "done." Wall Street also responded bullishly to the Labor Department's latest report on inflation amid tariff concerns. Meanwhile, Tesla (TSLA) rallied again, this time over robotaxi news on the stock market today.

Ahead of the market open, Dow Jones futures rose 0.3%. S&P 500 futures gained 0.4%, while Nasdaq 100 futures moved up 0.5%.

The 10-year Treasury yield ticked lower to 4.44% Wednesday morning. Oil prices, meanwhile, extended their gains, with West Texas Intermediate futures rising near $66.05 a barrel.

Among exchange traded funds, the Invesco QQQ Trust (QQQ) gained 0.4%, while the SPDR S&P 500 ETF (SPY) rose 0.3% ahead of the market open.

Stock market futures reversed higher Thursday after the Labor Department's cooler-than-expected consumer price index report. The CPI rose 0.1% for the month of May, below the 0.2% estimate, with an annual increase of 2.4%, below the 2.5% Econoday estimate.

Core CPI, which excludes food and energy, rose 0.1% on the month, cooler than the 0.3% expected reading. And the year-over-year increase was 2.8%, below the 2.9% estimate.

Stock Market Today: China Deal Is 'Done'

On Truth Social Wednesday morning, Trump said that "Our deal with China is done, subject to final approval with President Xi and me." Trump went on to say that the U.S. is "getting a total of 55% tariffs, China is getting 10%."

U.S. and Chinese officials announced late Tuesday that there's a "framework" to implement the "Geneva consensus" following two days of talks in London. The delegations will take the proposal back to Trump and Chinese President Xi Jinping for their approval.

U.S. officials say the framework should resolve issues regarding rare earths shipments. The Chinese team reportedly pushed for the U.S. to ease advanced chip curbs on China, but it's not clear yet what they got.

Tesla Rallies; Consumer Price Index Due

Shares of Tesla rallied another 2% Wednesday morning after Chief Executive Elon Musk wrote on X that the Tesla robotaxi service will "tentatively" begin in Austin, Texas, on June 22. Musk said the date could still shift.

Tesla had previously only said that the Austin robotaxi kickoff would be in June. Bloomberg recently reported that it might happen on June 12. Tesla shares are on a three-day winning streak.

Due out at 8:30 a.m. ET, the Labor Department's consumer price index, or CPI, is expected to rise 0.2% for the month of May, with an annual increase of 2.5%, according to estimates from Econoday. The core CPI, which excludes food and energy, is anticipated to rise 0.3% on the month. The year-over-year increase is seen at 2.9%.

Wall Street is highly anticipating this report, which is expected to provide insight into how the Trump tariffs are affecting prices.

Key earnings movers Wednesday morning included Chewy (CHWY), Dave & Busters (PLAY), GameStop (GME) and GitLab (GTLB).

Chewy stock sold off more than 7%, while shares of Dave & Busters jumped nearly 6%. GameStop stock tumbled nearly 5%, as GitLab plunged more than 12% in premarket trading.

Elsewhere, Dow Jones media giant Disney (DIS) broke out past a 113.44 buy point in a cup with handle in recent sessions, according to MarketSurge chart analysis. Shares are in the 5% buy range that goes up to 119.11, as they were flat in premarket trading Wednesday.

Tuesday's IBD Stock Of the Day was Dow Jones leader Amazon (AMZN), which broke out past a 214.84 cup-with-handle entry Monday. Amazon stock eased 0.4% premarket Wednesday.

Finally, Shopify (SHOP) is within striking distance of a 112.38 entry in a cup with handle. Shopify stock moved down a fraction in early action Wednesday.

The ongoing stock market uptrend provides a bullish setting for raising exposure, but investors still need to watch for volatility. Investors should buy stocks with a 21-day average true range, or ATR, of up to 8%. But they should be wary of being too concentrated in high-octane names.

Check out IBD MarketSurge's "Breaking Out Today" list for top growth stocks that are moving above correct buy points. Investors also can find potential breakouts on the "Near Pivot" list. To find additional stock ideas, check IBD Stock Lists like IBD 50, Big Cap 20 and Stocks Near A Buy Zone.

Source: investors

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Warren Takunda

Economic

U.S. inflation picked up a bit last month as food costs rose, though overall inflation remained mostly tame.

Consumer prices increased 2.4% in May compared with a year ago, according to a Labor Department report released Wednesday. That is up from a 2.3% yearly increase in April. Excluding the volatile food and energy categories, core prices rose 2.8% for the third straight month. Economists pay close attention to core prices because they generally provide a better sense of where inflation is headed.

The figures suggest inflation remains stubbornly above the Federal Reserve’s 2% target, which makes it less likely that the central bank will cut its key short-term interest rate. Trump has repeatedly urged the central bank to reduce borrowing costs.

Last week, the Labor Department’s Bureau of Labor Statistics, which compiles the inflation data, said it is reducing the amount of data it collects for each inflation report. Economists have expressed concern about the cutback, and while it isn’t clear how sharp the reduction is, most analysts say it is likely to have a minor impact. Still, any reduction in data collection could make the figures more volatile.

U.S. inflation likely picked up a bit last month as President Donald Trump’s tariffs start to bite, but lower prices for gas and possibly for air fares and used cars may limit the overall increase.

The government’s inflation report, to be released Wednesday, is forecast to show that consumer prices rose 2.5% in May compared with a year ago, according to economists surveyed by data provider FactSet. That would be the first increase in four months and up from 2.3% in April. Excluding the volatile food and energy categories, core prices are projected to have risen 2.9% in May from a year earlier, up from 2.8% in April.

Trump’s tariffs are expected to contribute to the uptick by raising the cost of some imports, including clothes, furniture, appliances, and possibly new cars. Many retailers and some consumer products companies have said they have plans to raise prices or have already done so to cover the cost of the import duties.

On a monthly basis, prices are expected to have moved up 0.2% from April to May, while core prices are forecast to have increased 0.3%. At that pace, core prices would rise much faster than the Federal Reserve’s 2% target. Economists and the inflation-fighters at the Fed focus on core inflation because it often provides a better sense of where inflation is headed.

Inflation has cooled in the past year and, excluding the impact of tariffs, economists say it would be on track to return to the Fed’s target, which would allow the central bank to cut its key interest rates. Yet core prices have been more stubborn and were stuck between 3.2% and 3.4% for nearly a year until February, when they started to decline a bit.

Nearly all economists expect Trump’s duties will make many things more expensive in the second half of this year, including cars and groceries, though by how much is still uncertain. Trump has slapped 30% tariffs on all imports from China, plus a 10% baseline tariff on imported goods from every other country, and 50% import taxes on steel and aluminum.

Given the potential for higher prices in the coming months, Fed Chair Jerome Powell and other Fed officials have made clear they will keep their key rate unchanged until they have a better sense of how tariffs will affect the economy.

The full impact of the tariffs likely won’t be felt until the second half of the year, analysts say, even though many tariffs have been in place, in one form or another, since March and April. There are several reasons it can take months for the duties to fully pass through into retail prices.

To begin with, many companies tried to beat the clock by bringing in foreign goods before Trump’s tariffs took effect, producing a flood of imports in March. As a result, they have stockpiled goods in warehouses that weren’t hit by tariffs and so don’t have to raise prices yet.

Many companies also held off on hiking prices during the chaos of April and May, when Trump announced sweeping tariffs on imports from nearly 60 countries, only to put them on hold a week later. He also ramped up duties on China to 145%, essentially cutting off trade with the United States’ third-largest trading partner. Imports fell sharply in April as a result. The U.S. and China last month agreed to lower duties, with the U.S. now taxing Chinese imports 30%.

For many firms, it wasn’t worth it to raise prices until they had a better sense of where tariffs would settle. It’s possible some duties could fall further if the Trump administration is able to reach trade deals in negotiations with China, the European Union, Japan and other countries.

Still, Bryan Eshelman, a partner and managing director at consulting firm AlixPartners, said higher prices “are coming.”

Eshelman expects that shoppers will start feeling the impact in July, and predicts prices for back-to-school items like clothing and backpacks could go up anywhere from 5% to 15%. Retailers may add surcharges tied to higher tariffs costs at the cash register starting in September, he said.

“I think that that’s something that retailers are going to be loathe to pull out and do. And so I think they will wait to see how things unfold, ” he said.

Most imported goods are actually parts or raw materials for larger products, such as the steel and aluminum goods now facing 50% duties. It will take time for those costs to filter through the supply chain and affect prices.

Some stores, however, have already said they will implement higher prices, including Best Buy, Walmart and Lululemon.

It was only last month when Trump ripped into Walmart after the nation’s largest retailer boldly warned that prices are already starting to go up on items like bananas. Walmart’s chief financial officer John David Rainey told The Associated Press that a car seat that currently sells for $350 at Walmart will likely cost customers another $100.

Rainey also told analysts at an Oppenheimer investor conference on Monday that for some items, Walmart will reduce inventory by as much as 20% because it expects higher prices will reduce demand, and it doesn’t want to be stuck with leftover inventory.

Source: AP

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Damon

Central Bank

Economic

Headline CPI rose 2.4% YoY last month, a modest uptick from April, but in line with expectations, while core prices rose 2.8% YoY over the same period, 0.1pp cooler than consensus, and unchanged from last time out. In addition, the so-called ‘supercore' inflation metric, aka core services less housing, rose 2.9% YoY, a notable rise from the 2.7% YoY prior, bucking the trend of coolness elsewhere.

May 2025 US CPI: No Tariff Effect Just Yet_1

Meanwhile, on an MoM basis, both headline and core prices rose just 0.1% MoM, both also considerably cooler than had been expected, with the expected price pressures from tariff pass-through thus far elusive.

As is usually the case, annualising this data helps to provide a clearer picture of underlying inflationary trends, and the broader backdrop:

•3-month annualised CPI: 1.0% (prior 1.6%)

•6-month annualised CPI: 2.6% (prior 3.0%)

•3-month annualised core CPI: 1.7% (prior 2.1%)

•6-month annualised core CPI: 2.6% (prior 3.0%)

The details of the CPI report, though, are of considerably more importance this time around than the headline metrics, as participants and policymakers alike continue to try and gauge the degree to which tariffs are being passed on to consumers in the form of higher prices. On that note, and again contrary to expectations, the pace of core goods inflation remained subdued, at just 0.3% YoY, while core services prices rose 3.6% YoY, unchanged from last time out.

May 2025 US CPI: No Tariff Effect Just Yet_2

As the data was digested, money markets repriced marginally in a dovish direction, once again fully discounting two 25bp cuts by year-end, up from around 44bp pre-release.

May 2025 US CPI: No Tariff Effect Just Yet_3

Taking a step back, the May CPI figures reinforce the FOMC's ongoing ‘wait and see' approach, and shan't significantly alter the monetary policy outlook. Despite being cooler than consensus, upside inflation risks from tariffs clearly remain.

Policymakers, hence, will remain on the sidelines for the time being, seeking to ‘buy time' in order to assess the impacts of the tariffs which have been imposed, and how this alters the balance of risks to each side of the dual mandate. Concurrently, the Committee are also attempting to ensure that inflation expectations remain well-anchored, despite the trade-induced ‘hump' in inflation that we are now likely to see through to the end of summer.

Overall, Powell & Co. seem highly unlikely to deliver any rate cuts before the fourth quarter, with just one 25bp cut in December my base case, even if the direction of travel for rates clearly remains to the downside. Next week's FOMC is unlikely to ‘rock the boat' especially much, merely being a ‘placeholder' as policymakers continue to stand pat for the time being.

Source: Pepperstone

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