Treasury Yields Hold Steady As Investors Await Fed Rate Decision

Samantha Luan

Political

Forex

Stocks

Summary:

U.S. Treasury yields held steady on Wednesday as investors keenly awaited the Federal Reserve's interest rate decision as well as a batch of economic data.

U.S. Treasury yields held steady on Wednesday as investors keenly awaited the Federal Reserve's interest rate decision as well as a batch of economic data.At 4:19 a.m. ET, the 10-year Treasury yield was little changed at 4.33%. The 2-year yield was down less than a basis point to 3.87%, and the 30-year note was also lower by less than a basis point to yield 4.867%.

The Fed will make its interest rate announcement on Wednesday afternoon, and it's widely expected to keep interest rates unchanged. Traders are pricing in a nearly 98% likelihood that the central bank will keep its key rate in a range of between 4.25% and 4.5%, according to CME Group's FedWatch tool."In terms of near-term policy, our economists think Powell is unlikely to remove a September rate cut from consideration nor intentionally raise the probability of that outcome," Deutsche Bank analysts said in a note."Even though political pressure on Powell to cut rates remains high, our view is that due to modestly stronger inflation prints over the coming months, the first cut should be in December, after which we expect a further 50bps reduction in Q1 2026."

Fed Chair Jerome Powell will also give a speech at the press conference after the decision, which investors will monitor for hints about future monetary policy decisions, especially as President Donald Trump has tried to pressure the central bank leader to lower rates in recent months.Investors will also monitor Fed Chair Jerome Powell's speech at the press conference after the decision for hints about future monetary policy decisions.

Source: CNBC

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Glendon

Economic

Forex

The German economy shrank slightly by 0.1% in the second quarter of 2025 from the previous three months, flash data from statistics agency Destatis showed Wednesday.

The figure aligned with the expectations of analysts polled by Reuters and marked a sharp slowdown compared to a revised 0.3% expansion in the first quarter.

U.S. tariffs and their impact have been a top concern for European economies. U.S. president Donald Trump's so-called reciprocal tariffs initially came into effect in April as the second quarter kicked off.

The duties were then however temporarily reduced, with the last few months plagued by much uncertainty as negotiations for trade agreement were underway. Some higher sectoral tariffs, including on autos and steel and aluminum, have also been in effect.

The European Union over the weekend agreed to a trade framework with the U.S., which includes 15% tariffs being imposed on the bloc. Some goods are set to be exempt, and levies on autos have been reduced to the baseline level.

Later on Wednesday, a preliminary reading of the euro zone's gross domestic product is expected. According to a Reuters poll, economists are expecting growth to have flatlined.

In the first three months of 2025, the euro zone economy had grown 0.6%.

Source: CNBC

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Gerik

Economic

Stalemate in Sweden Raises Tariff Stakes

The latest round of U.S.-China trade negotiations ended Tuesday without progress on extending the current tariff truce. Held in Sweden, the high-level talks were described as “very good” by U.S. Treasury Secretary Scott Bessent, yet any binding decision still awaits President Donald Trump’s signature. Without an extension by the looming August 12 deadline, tariffs on a broad range of Chinese exports will snap back to their more punitive April levels.

This delay has rattled markets already uneasy about mixed corporate earnings and economic uncertainty. The S&P 500 and Nasdaq both closed lower on Tuesday, pulling back from early record highs as investor optimism faded. In the Asia-Pacific region, Wednesday trading was mixed, with sentiment weighed down by the stalemate and a magnitude 8.8 earthquake in Russia's Far East that triggered a Pacific-wide tsunami warning.

“Boomerang Tariffs” Risk Further Economic Strain for China

The potential tariff reversal referred to by Bessent as a “boomerang” comes at a time when China’s economy is already under stress. Weak domestic consumption, a troubled property sector, and deflationary headwinds are forcing policymakers in Beijing to focus on industrial capacity management and employment stability, as emphasized in the recent Politburo meeting.

If Washington reinstates the April tariff levels, Chinese exports will face renewed pricing disadvantages, potentially disrupting supply chains and accelerating the shift of manufacturing toward Southeast Asia an ongoing trend since the initial U.S.-China trade disputes in the Trump administration’s first term.

Corporate Warnings and Market Volatility Compound Risks

The trade impasse adds to a growing list of concerns in the U.S. corporate sector. UPS withheld forward guidance citing macroeconomic volatility, while Starbucks reported its sixth straight quarter of same-store sales declines, despite hints of recovery. On a more optimistic note, Boeing and Procter & Gamble posted earnings beats, and Apple’s anticipated foldable iPhone in 2026, predicted by JPMorgan, has stirred excitement in the tech sector.

Amid global economic headwinds, Chinese AI companies appear to be gaining traction. At the recent World AI Conference in Shanghai, firms like Tencent showcased monetizable AI applications built on domestic models like Hunyuan. Startups such as Black Lake Technologies report a shift in engineering talent toward applied AI development for specific industries, signaling a more commercially grounded phase in China’s AI race.

With the clock ticking toward August 12, both Washington and Beijing face mounting pressure to resolve their trade impasse. For China, a failure to extend the truce could reintroduce painful tariffs just as its economy seeks stabilization. For the U.S., maintaining leverage while avoiding global supply chain shocks will be a difficult balance. Either way, the next two weeks could reshape the trajectory of the bilateral economic relationship for the rest of the year.

Source: CNBC

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Gerik

Economic

Politburo Sends Strong Signal on Industrial Regulation and Economic Stability

At its July meeting, China’s Politburo the Communist Party’s top policymaking body committed to more rigorous oversight of competition and production capacity in strategic industries, according to a Xinhua report published Wednesday. The statement reflects Beijing’s growing concern over inefficiencies and overcapacity risks that have long plagued sectors like steel, new energy vehicles, and real estate.

The move comes at a time when the world’s second-largest economy faces “many risks and challenges,” as highlighted by state media. Slowing domestic demand, persistent deflationary pressures, and weak private sector confidence have weighed on China’s post-pandemic recovery. While the Politburo pledged to maintain continuity and stability in its economic policy, it also emphasized the need for more flexibility to adapt to evolving conditions.

Focus on Job Stability and Business Confidence

The Politburo specifically highlighted employment and enterprise stability as key priorities. This aligns with recent measures aimed at supporting small businesses and lifting consumer sentiment, which has remained sluggish despite stimulus efforts.

By promising stronger capacity management, Chinese authorities are likely targeting sectors with inefficient investment flows, where unregulated expansion has led to oversupply and profit erosion. This echoes past directives on “supply-side structural reform” but appears more urgent under current economic headwinds.

Setting the Course for H2 2025

The July Politburo meeting traditionally sets the tone for macroeconomic policy in the second half of the year. This latest guidance suggests a balanced approach: avoiding sharp stimulus while ensuring that regulatory oversight is used strategically to optimize industrial productivity, reduce redundancy, and stabilize market expectations.

China watchers will now look to the upcoming Third Plenum and further State Council announcements to gauge how these high-level promises translate into sector-specific actions. Whether the government can walk the tightrope between tightening control and supporting innovation will be key to restoring momentum in 2025.

Source: Reuters

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Gerik

Economic

A Historic Peak in Germany’s Public Debt Load

Germany, Europe’s largest economy, is facing an alarming surge in public debt. According to the latest data released on July 29 by the Federal Statistical Office, the country’s total public debt has reached €2.51 trillion, marking a 2.6% increase compared to the previous year. This brings the average debt per citizen to a record €30,062 up by €669 year-on-year.

The rise in debt reflects intensifying fiscal pressure at all levels of government. The federal government remains the largest borrower, with liabilities climbing to €1.73 trillion. Debt held by state governments rose 2.1% to €607.3 billion, while municipal-level debt reached €170.5 billion, continuing its upward trend for the fifth consecutive year.

Interestingly, the only area to record a reduction was social security, whose debt dropped sharply by 73.9%, now standing at just €10 million. However, this minor improvement is overshadowed by the broader debt escalation across federal and subnational entities.

Budget Deficits and Economic Constraints

The data release coincides with Berlin's completion of its 2026 draft budget, which includes a projected deficit of €172 billion for the 2027–2029 period. This figure exceeds the prior estimate by €30 billion, highlighting the growing gap between revenue generation and spending obligations.

A major factor driving this fiscal shortfall is the government’s planned corporate tax cuts intended to stimulate investment. While aimed at reviving growth, the policy risks exacerbating already constrained fiscal space. The federal government has pledged to offset revenue losses for state and municipal authorities affected by this tax policy shift.

The debt surge comes amid concerns that Germany’s economy may stagnate for a third straight year. With weak tax income and sluggish GDP growth, the government faces the dual challenge of fostering economic recovery while maintaining fiscal discipline.

Implications and Outlook

Germany's swelling public debt and persistent deficits point to long-term structural challenges in fiscal policy and economic management. While the government hopes that tax relief and strategic investments will reignite growth, continued weak performance could deepen the debt burden and limit future fiscal maneuverability.

As Berlin balances between stimulus and responsibility, the rising debt per citizen serves as a stark reminder of the price of delayed economic recovery and policy compromises. The situation demands careful recalibration if Germany is to restore both growth momentum and financial sustainability.

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Daniel Carter

Economic

Commodity

Talks between Kazakhstan's President Kassym-Jomart Tokayev and Turkish leader Tayyip Erdogan on Tuesday included a possible increase in Kazakh oil exports via the Baku-Tbilisi-Ceyhan (BTC) oil pipeline, the press service of the head of Kazakhstan reported.

"The delegations discussed issues of cooperation in the energy sector, including prospects for increasing exports via the Baku-Tbilisi-Ceyhan oil pipeline," the statement said, without providing additional details.

The agenda of Tokayev's visit to Turkey for a meeting of the two countries' high-level strategic cooperation council also included cooperation in power generation, agriculture and mining.

Kazakhstan increased oil exports via BTC in the first half of 2025 by 12% compared to the same period last year to 785,000 tons (34,000 barrels per day), according to the state statistics.

Oil is delivered to Baku by tankers via the Caspian Sea from the port of Aktau, which would need upgrading to increase export levels. Also, oil exports via BTC are limited by the quality requirements for Kazakh crude to join the pipeline.

Kazakhstan in its development plan until 2029 considered the possibility of building a trans-Caspian oil pipeline and marine terminals on the Kazakh and Azerbaijani coasts of the Caspian Sea.

Kazakhstan, whose main income comes from oil exports, is the world's biggest landlocked country, and the two main routes for exporting its oil to international markets pass through the Russia to its Black Sea and Baltic ports.

Exports of Kazakh oil circumventing Russian ports made up just 5.9% of the total exported volume of 32.6 million tonnes in the first 6 months of 2025 and this share remained unchanged from 2024, according to state statistics.

In 2022, President Tokayev called for an increase of oil exports bypassing Russia. Following this, Kazmunaigaz and Azerbaijan's state oil company SOCAR concluded an agreement, envisaging the transport of 1.5 million tonnes of oil per year from the Tengiz oil field to the BTC.

Source: Reuters

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Gerik

Economic

Trump Raises Tariff Stakes as Trade Talks Reach Critical Point

President Trump has publicly stated that India, while a "good friend," maintains some of the highest tariffs in the world and could soon be subject to 20–25% import duties on its exports to the U.S. if the two nations fail to secure a deal by August 1. This potential escalation follows Washington’s broader agenda to open foreign markets for U.S. goods and penalize nations maintaining protectionist barriers.

While negotiations have been ongoing, Indian officials have so far resisted U.S. demands to fully open sensitive sectors such as agriculture, dairy, and automotive imports. India has drawn “red lines” in negotiations, including rejecting genetically modified crop imports and safeguarding domestic dairy production an industry vital to the livelihood of millions and politically crucial ahead of upcoming state elections.

Escalating Tensions: Trade, Oil, and Strategic Calculations

Relations between the two democracies have grown strained, especially after Trump took credit for brokering an April ceasefire between India and Pakistan, a move that angered Indian leadership. More recently, Trump threatened "secondary tariffs" on countries including India and China that continue purchasing oil from Russia, further complicating India’s geopolitical balancing act.

Despite tensions, India has shown limited flexibility. Reports suggest it is willing to offer zero tariffs on select goods like auto parts and pharmaceuticals, but remains firm on core sectors. The U.S., for its part, has delayed implementing higher tariffs since April to allow talks to progress, temporarily reducing duties to 10%. However, as the extended deadline nears, the risk of tit-for-tat tariffs returns.

India’s Strategic Dilemma: Open Markets or Protect Farmers?

Prime Minister Modi's administration remains cautious, facing domestic pressure to shield the agricultural sector, where a significant portion of the Indian population earns its livelihood. Opening the market too widely risks political backlash, especially from rural voters, a critical base for Modi’s ruling party in upcoming elections.

U.S. Trade Representative Jamieson Greer emphasized the need for more time to assess India’s willingness to accommodate U.S. exports. Meanwhile, Indian negotiators remain hopeful for a compromise that avoids the sharpest tariffs, working toward a temporary agreement that could preserve trade flow while sidestepping a larger political fallout.

With August 1 fast approaching, the U.S.-India trade standoff exemplifies the friction between national economic interests and global trade integration. Trump’s hardline approach could reshape bilateral trade dynamics, but also risks pushing India closer to self-reliance and alternative trade partners. For now, both nations are locked in a tense game of economic brinkmanship where tariffs are not just numbers, but tools of influence.

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