Trump Pressure on Fed may Steepen US Yield Curve, Fund Managers Say

Bond

Political

Summary:

Persistent U.S. deficits and heavy bond issuance have kept long-term Treasuries pressured even as short-end yields price in more aggressive Fed rate cuts.

The Treasury yield curve could steepen as investors demand higher compensation for perceived fiscal and political risk amid rising pressure from the Trump administration on the U.S. Federal Reserve, bond fund managers said on Tuesday.

President Donald Trump's persistent criticism of the Fed board and Chair Jerome Powell for not lowering interest rates, and his attempts to change the voting board's composition are chipping away at investor confidence in the institution's authority.

Yield curves steepen when long-term rates rise faster than short-term, reflecting concerns about a resurgence in inflation and bigger U.S. deficits. A popular trade this year, especially in the 5-year/30-year yield curve, has been for investors to buy the shorter end and sell the 30-year bond.

"If politics bends policy, I'd fade rallies in the dollar and stay nimble on duration," Gareth Nicholson, chief investment officer and head of discretionary portfolio management at Nomura, told the Reuters Global Markets Forum. "Treat dollar and long bonds as the first shock absorbers."

Skepticism over the Fed's independence is beginning to weigh on long-end yields, even as markets continue to conditionally trust the central bank, he said.

Persistent U.S. deficits and heavy bond issuance have kept long-term Treasuries pressured even as short-end yields price in more aggressive Fed rate cuts.

The two-year yield, which typically moves in step with Fed rate expectations, fell to 3.51% on Tuesday after climbing to 3.578%, while the 10-year was at 4.03%, down in recent weeks as softer labor data spurred bets on policy easing.

Nicholson expects front-end yields to fall toward the high-2% range if labor market softness persists, with the long-end staying broadly anchored in the 3%-4% band. He sees a modest curve-steepening in early-2026 as monetary easing is weighed against supply dynamics.

Stephen Parker, co-head of global investment strategy at JPMorgan Private Bank, said investors were not being adequately compensated for inflation and fiscal worries, with "the long end of the Treasury curve (being) most sensitive to those risks."

Mike Wilson, Morgan Stanley's chief investment officer, said policymakers will likely seek to repress yields even at the risk of reigniting inflation.

"That is why people are abandoning sovereign debt and choosing to buy stocks and other assets," Wilson said, adding, however, that he expects back-end yields to decline in the near-term as bill issuance, Treasury buybacks and Fed rhetoric pressure rates lower.

As Treasuries lose some appeal, bond fund managers expect private credit will increasingly fill the yield and diversification gap.

"Private credit still pays for patience," Nomura's Nicholson said, highlighting opportunities in secondaries, infrastructure, renewables, and logistics-focused real estate.

JPMorgan's Parker noted corporate sector fundamentals remain strong, with spreads only appearing tight due to distorted Treasury market dynamics. "Our preference is to focus on carry over long duration," he said.

Source: Reuters

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Adam

Stocks

Economic

Two key names just increased their dividends, and another winner in artificial intelligence is likely to do the same by year’s end.

Below, we’ll examine these three stocks and outline the yield investors can expect moving forward.

Verizon Boosts Its Massive Dividend Even Higher

First up is Verizon Communications. Shares of the Big Three telecom giant have had a solid year in 2025, providing a total return of around 15.5%. That’s moderately higher than the S&P 500’s approximately 12.8% total return. However, it is less than half the 34.2% total return of rival AT&T NYSE: T, but beats out the 10.6% return of T-Mobile US Verizon has experienced sluggish revenue growth of between 0% and 2% over the last four quarters. Nonetheless, shares have performed well due to low expectations and the company’s large dividend yield.

On Sept. 5, Verizon declared a new dividend of 69 cents per share, an approximately 1.8% increase from its previous payment. The dividend is payable on Nov. 3 to shareholders of record as of the Oct. 10 close. Although not a large increase, Verizon’s indicated dividend yield now sits at nearly 6.3%. Overall, Verizon’s indicated yield ranks within the top 10 among all stocks in the S&P 500 Index and is the highest among S&P 500 communications stocks.

Looking forward, Verizon hopes to stop the bleeding in its retail postpaid phone business, which has lost over 400,000 subscribers in 2025. Meanwhile, its broadband business is performing well, adding more than 600,000 customers.

JCI Lifts Dividend 8% With Shares Up Big in 2025

Next up is Johnson Controls International, another name beating the market in 2025. However, JCI’s performance is much more impressive than Verizon’s, with shares notching a total return of more than 37%.

Partially driving the success at Johnson Controls is the company’s data center vertical. Sales to data centers are becoming a larger part of the firm’s business and now make up more than 10% of total sales. The company primarily sells thermal management systems to these customers. Specifically, its chillers cool down data centers as a whole, sort of like specially designed air conditioning systems. They are complementary technologies to cooling systems that are directly placed on server racks.

On September 10, Johnson Controls announced a dividend of 40 cents, marking an 8.1% increase over its previous payout. This new dividend will be paid on October 17 to shareholders of record as of the close of business on September 22. The stock now has a solid indicated dividend yield of 1.5%, slightly higher than the S&P 500 Index’s approximately 1.1% indicated yield.

Broadcom Set to Announce December Dividend Increase

Looking into the future, investors should expect a dividend increase from semiconductor giant Broadcom by the end of 2025. Broadcom’s dividend has stayed at the same 59-cent per share level for the past four quarters. Since 2021, Broadcom has never gone more than four quarters without increasing its dividend.

Additionally, Broadcom’s business is performing extremely well. Its last twelve months (LTM) free cash flow hit a record of just under $25 billion last quarter. Overall, these factors clearly point to Broadcom announcing another dividend increase in December 2025. So how large could Broadcom’s next dividend increase be?

In September, Broadcom will pay a dividend of 59 cents, compared to a 36-cent payout in Sept. 2021. That’s a compound annual growth rate of around 13%. The last time Broadcom increased its dividend, it did so by 11%. With free cash flow booming, it wouldn’t be surprising to see Broadcom announce a dividend boost at the high end of this range.

Assuming a 13% boost, Broadcom’s dividend would move up to around 67 cents per share. Based on Sept. 12 closing prices, that would equate to an indicated yield of nearly 0.75%. Although not high, investors should note that the figure eclipses the current indicated yield of every Magnificent Seven stock.

VZ, JCI and AVGO: Dividend Boosters and a Dividend Booster-to-Be

Overall, VZ and JCI continue to reward their shareholders with increased dividends.

For Broadcom shareholders, the exciting day when the company raises its dividend is very likely approaching, an added bonus to the stock’s stellar 2025 performance.

Source: investing

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Commodity

Oil rose as pressure mounted on Russia’s oil industry and the conflict in the Middle East flared up.

West Texas Intermediate climbed as much as 1.6% to top $64 a barrel after Reuters reported that Russia’s Transneft pipeline, which handles more than 80% of the country’s oil, has restricted firms’ ability to store crude. Ukraine attacked another Russian refinery overnight as Western nations consider fresh sanctions in a bid to push President Vladimir Putin to the negotiating table.

Ukrainian military forces have intensified drone strikes on Russian energy facilities, including the country’s largest Baltic oil terminal in Primorsk.

Meanwhile, the European Union is considering sanctions on companies in India and China that enable Moscow’s oil trade as part of a package of fresh restrictions. Washington earlier implied that the US wouldn’t follow through with threats to penalize Russian oil unless Europe also does so.

“President Trump mitigated the risk of imminent sanctions by placing the onus on NATO countries to act first,” said Daniel Ghali, a commodity strategist at TD Securities. Still, the situation is spurring buying from algorithmically driven commodity trading advisers, “fueling a whipsaw higher in prices.”

Elsewhere, Israel launched an aerial onslaught on the Yemeni port city of Hodeida, according to the Associated Press. The moves threaten to escalate the conflict in the Middle East, potentially threatening supplies from a region that produces about a third of the world’s crude supplies.

Futures have traded in a narrow range in the past month, hemmed in by the opposing forces of geopolitical tensions and bearish fundamentals. A faster-than-scheduled return of OPEC+ supply has prompted the International Energy Agency to forecast a record glut next year.

Commodities including oil may find support from an expected Federal Reserve interest-rate cut expected this week on the prospect that monetary easing would stimulate the US economy and increase energy demand.

Still, some oil market metrics are pointing to softness. The prompt spread for Brent — the difference between its two closest contracts — was at 39 cents a barrel on Tuesday, down from almost $1 two months ago, narrowing a bullish structure known as backwardation.

Source: Bloomberg

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Adam

Economic

US economic activity is expected to downshift in the third quarter, but not enough to trigger a recession warning, based on the median estimate for a set of compiled nowcasts.

Growth is projected to increase at an annualized 2.1% pace for the July-through-September period, according to the median nowcast. The estimate reflects a substantially softer rise relative to the strong 3.3% increase reported for Q2. The Bureau of Economic Analysis is scheduled to publish its initial Q3 GDP report on October 30.

US Q3 GDP Report Still on Track to Show Slower Growth_1

Today’s median Q3 nowcast remains relatively stable vs. recent estimates, ticking down slightly from the 2.2% nowcast published on Sep. 4.

Although the economy is expected to downshift in Q3, recession risk is still projected to remain low in the current quarter, but headwinds are strengthening for Q4, economists predict.

Quoting several economists, Morningstar.com reports that “A rapidly cooling job market is raising alarm bells for market watchers.”

“Recession risks are growing,” says Pimco economist Tiffany Wilding, who, like many others, does not see a major slowdown as her base case. She adds that right now, however, “the economy is more vulnerable to any kind of negative shock.”

“The tariffs are certainly hurting, but they’re not quite bad enough to get us to that recession,” says Samuel Tombs, chief US economist at Pantheon Macroeconomics.

“The labor market is more vulnerable today than at any point in this expansion,” says Ryan Sweet, chief US economist at Oxford Economics. His base case is that the US avoids a recession, but he characterizes the economy overall as susceptible to a slowdown, thanks in large part to pressure from the labor market.

UBS economists, by contrast, have a darker view for the near-term outlook and estimate a 93% chance that the US will slip into a recession at some point this year. Moody’s chief economist Mark Zandi said the alarm bells are ringing and the odds of a downturn in the next 12 months are “uncomfortably high.”

Perhaps, but whenever the next NBER-defined recession begins, the odds remain relatively high that Q3 will not mark the first quarter of contraction.

Source: investing

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Manuel

Cryptocurrency

Political

Binance is approaching a potential agreement with federal prosecutors to eliminate the requirement that it hire an outside compliance monitor from its $4.3 billion money laundering settlement.

Bloomberg News reported on Sept. 16 that the Justice Department (DOJ) is considering removing the oversight mechanism as part of a broader policy shift under the Trump administration, according to people familiar with the discussions.

The stance shift has eliminated several corporate monitors appointed during the previous administration. Federal prosecutors discussed the three-year monitorship requirement with Binance, though no final decision has been reached regarding the confidential talks.

The crypto exchange agreed to pay one of the largest corporate penalties in US history in 2023 to resolve allegations it failed to prevent money laundering through its platform.

Binance founder Changpeng Zhao served a four-month prison sentence as part of the settlement and sought a presidential pardon from Trump in a May podcast appearance.

DOJ reviews corporate monitor policy

Matthew Galeotti, head of the DOJ’s Criminal Division, issued guidance earlier this year questioning the effectiveness of mandatory corporate oversight.

The department’s memo stated that monitors “can also impose substantial expense and interfere with lawful business operations” while acknowledging their role in preventing repeat violations.

The Justice Department has already terminated independent oversight for three companies that accepted monitors under Biden administration settlements.

According to the company’s annual reports, Glencore Plc units accumulated $142 million in monitoring costs between 2023 and 2024 before prosecutors ended their oversight requirements.

NatWest Group Plc and Navy contractor Austal USA agreed to enhanced compliance reporting as substitutes for ending their monitor requirements, based on recent court records.

Binance would likely face similar enhanced reporting obligations before prosecutors approve monitor removal. The exchange has established connections to Trump family’s business ventures, with some reports alleging that it played a role in the development of World Liberty Financial’s stablecoin USD1.

The exchange has denied the allegations.

Under the new administration, the Securities and Exchange Commission dropped or paused multiple investigations into crypto companies, including Binance. Binance maintains two separate monitors from its DOJ settlement and Treasury Department agreement with FinCEN.

The Treasury monitor remains active while prosecutors consider the DOJ oversight requirement.

Source: Cryptoslate

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Manuel

Central Bank

Economic

A key interest rate for the US financial system jumped to the highest level this year — exceeding the Federal Reserve’s target range for its own benchmark — as dwindling liquidity is exacerbated by Treasury auction settlements and quarterly corporate tax payments this week.

The Secured Overnight Financing Rate — a one-day lending benchmark linked to activity in the market for repurchase agreements — rose to 4.51% as of Sept. 15 from 4.42% the prior session, according to the latest Federal Reserve Bank of New York data published Tuesday. That’s the biggest increase in the fixing since Dec. 31.

Rates on overnight financing used by banks and asset managers to borrow and lend to each other have been steadily rising as the Treasury is rebuilding its cash pile concurrently with the Federal Reserve reducing its balance sheet. Meanwhile, usage of one of the Fed’s overnight lending facilities — long considered a measure of excess liquidity in funding markets — has dropped to a four-year low. US Short-Term Rate Jumps to Year High as Funding Strains Grow_1

US Short-Term Rate Jumps to Year High as Funding Strains Grow_1

The uptick pushed the spread between SOFR and the effective fed funds rate, which policymakers are expected to cut by a quarter point on Wednesday, to 18 basis points — the widest since Dec. 26. The fed funds rate is as of Sept. 12.

It’s 11 basis points above the rate the Fed pays on reserves parked at the central bank — currently 4.40%.

“Funding market conditions are still very stable,” said Rishi Mishra, an analyst at Futures First Canada Inc. “If anything, we can say there that we are shifting closer to the slightly upward slopes of the reserves demand curve. This would mean larger fixings on all settlement and balance sheet dates.”

Persistently high overnight rates could put into question how much longer the Fed can continue unwinding its balance sheet — a process known as quantitative tightening — without draining essential liquidity from the financial system. Over time, they can also reduce the effectiveness of reductions to the central bank’s target rate, just as the Fed is expected to resume its easing cycle.

The Fed has been winding down its balance sheet since 2022, in a bid to reverse trillions of dollars in asset purchases designed to stimulate the economy after the pandemic shock. In the process, it hopes to bring bank reserves kept at the central bank to a minimum level, considered as ample, which would be sufficient enough to prevent market disruptions.

Officials this year slowed down the pace of balance-sheet reduction as reserves have been approaching that endpoint. Bank reserve balances currently stand at around $3.15 trillion, according to the latest Fed data. Fed Governor Christopher Waller recently estimated the minimum ample level to be around $2.7 trillion.

Benchmark rates are expected to remain under pressure as the government ramps up Treasury bill issuance after raising the debt ceiling in the summer, draining the Fed’s overnight reverse repurchase agreement facility. On Tuesday, some 16 counterparties parked $18.8 billion at the so-called RRP, up from $17 billion the prior session.

Yet. market participants are expecting a reprieve before volatility picks up again for quarter-end. That’s because two long-dated cash management bills are slated to mature, resulting in a net supply paydown of $50 billion on Tuesday, in addition to the monthly influx of cash from government-sponsored enterprises in the coming days.

“Repo has normalized quickly this morning, which is somewhat encouraging,” said Wells Fargo strategist Angelo Manolatos. “Paydowns over the next two weeks provide some relief to the market before attention shifts to quarter-end.”

Source: Bloomberg

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Adam

Economic

Treasury Secretary Scott Bessent said Tuesday that President Donald Trump was willing to let TikTok go dark, and that it was “what turned the tide” in the deal framework with China.

“President Trump made it clear that he would have been willing to let Tiktok go dark, that we were not going to give up national security in favor of the deal,” Bessent told CNBC’s “Squawk Box.”

TikTok parent company ByteDance is still looking at a Sept. 17 deadline to divest the app’s U.S. operations or potentially be shut down in the country.

The Trump administration hasn’t yet formally extended the deadline, though U.S. Trade Representative Jamieson Greer said Monday that more time may be needed for the deal to be finalized and signed.

Bessent said Tuesday that the commercial terms of the deal between ByteDance and the new investors had been done “in essence” since March or April.

After Trump’s massive tariff announcement on April 2, the Chinese put the deal on hold, he said.

Trump’s tariff and trade threats, as well as chip restrictions, have weighed on relations between the world’s biggest economies, but the deal for TikTok could mark a turning point, with Trump and Chinese President Xi Jinping expected to speak Friday to finalize the deal.

“We were able to reach a series of agreements, mostly for things we will not be doing in the future that have no effect on our national security,” Bessent said Tuesday.

Though Trump may be open to letting the app go dark, the White House started its own TikTok account last month. The administration has nearly 1 million followers on the platform.

“The kids wanted it so badly,” Trump said outside the White House on Tuesday. “I had parents calling me up. They don’t want it for themselves. They want it for their kids. They say if I don’t get it done, they’re in big trouble with their kids.”

A number of potential U.S. owners have been floated in the past several months, with Trump voicing support for Oracle Chairman Larry Ellison or Tesla CEO Elon Musk.

CBS News reported Monday that Oracle was among “multiple companies” in the potential deal, citing sources.

Oracle is already key to TikTok’s web infrastructure, Reuters reported in January.

The news service said the White House was lining up a deal with Oracle and a group of outside investors to take over the app’s U.S. operations, with the cloud giant handling data collection and software updates.