Treasury Yields Slip on Fed Leadership Buzz and Data Delays

Liam Peterson

Traders' Opinions

Remarks of Officials

Data Interpretation

Economic

Central Bank

Bond

Summary:

Treasury yields dipped amid expected dovish Fed shift under Warsh and data delays, clouding market outlook.

U.S. Treasury yields declined on Tuesday as traders weighed the possibility of a major policy shift at the Federal Reserve and navigated economic data delays caused by a partial government shutdown.

Market focus has intensified on Kevin Warsh, who President Donald Trump selected on Friday to lead the central bank when Jerome Powell’s term concludes in May. Though previously known as an inflation hawk, Warsh is now advocating for lower interest rates.

This potential change at the top is creating complex crosscurrents in the bond market, pushing yields lower while reshaping expectations for the Fed's long-term strategy.

A New Fed Playbook Under Warsh?

Jason Pride, chief of investment strategy and research at Glenmede, anticipates the Fed will cut rates twice this year by 25 basis points each—a scenario he notes is already largely priced into the market.

However, the more significant impact of a Warsh-led Fed could be on its massive balance sheet. Warsh has been a vocal critic of the Fed's large holdings, arguing they distort the financial system. In a November Wall Street Journal opinion piece, he stated, "the Fed's bloated balance sheet, designed to support the biggest firms in a bygone crisis era, can be reduced significantly."

This stance is causing the yield curve to steepen. Pride explained that Warsh has been "a strong advocate against the overuse of the Federal Reserve's balance sheet." At the same time, his view on short-term rates "is very much in line with the Federal Reserve's policy up until now, and maybe even a little bit dovish relative to it."

Bond Market Responds to Uncertainty

The mixed signals are being reflected in Treasury prices:

• The 2-year Treasury note yield, sensitive to Fed rate expectations, edged down 0.2 basis points to 3.568%.

• The benchmark 10-year Treasury note yield fell 1 basis point to 4.268%.

The spread between the two-year and 10-year yields, a key gauge of the yield curve, narrowed slightly by half a basis point to 69.5 basis points. This followed a move to 72.7 basis points on Monday, its steepest level since April. Adding to the downward pressure on yields was a sharp selloff in stocks on Tuesday, which likely boosted safe-haven demand for government debt.

Data Delays and Market Crosscurrents

Compounding the uncertainty is a lack of clear economic signals. Thomas Simons, chief U.S. economist at Jefferies, pointed out that some traditional market correlations have broken down recently, making it difficult to determine what is driving asset prices.

"It feels like the market's having a hard time assessing whether or not there is a kind of broad risk-off or risk-on tone at any given time because of all the crosscurrents," Simons said.

The partial government shutdown has exacerbated this issue by delaying the release of January's crucial employment report, originally scheduled for Friday. While the U.S. House of Representatives narrowly approved a deal on Tuesday to end the shutdown, the data blackout has left investors flying blind.

The Outlook for Inflation and Rates

Recent economic data had pushed market expectations for the next Fed rate cut to June. However, a significant slowdown in the labor market, once the data is released, could accelerate that timeline.

Looking further ahead, Pride projects the U.S. economy could see above-average growth in 2026 as tariff headwinds fade and fiscal stimulus takes effect. He warned this could raise inflation risks, keeping it a primary focus for the Fed.

The debate within the central bank continues. On Tuesday, Richmond Fed President Tom Barkin noted that while rising productivity is helping to ease cost pressures, its persistence is hard to predict, making future monetary policy decisions difficult. In contrast, Fed Governor Stephen Miran, speaking on Fox Business Network, continued to argue for aggressive interest-rate cuts this year.

To stay updated on all economic events of today, please check out our Economic calendar

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Manuel

Cryptocurrency

A nervous mood swept through markets Tuesday as stocks stumbled and bitcoin slumped to its lowest level since November 2024.

The Dow was down 360 points, or 0.73%. The broader S&P 500 fell 1.25%, retreating after briefly flirting with a record high. The tech-heavy Nasdaq slumped 2%.

In a sign of the risk-averse mood, bitcoin dropped almost 7% across the past day and fell just below $73,000, hitting its lowest level since President Donald Trump’s victory in the presidential election. Bitcoin then slightly rebounded and traded just below $75,000.

Bitcoin is down roughly 41% since hitting a record high above $126,000 in October. The Trump administration has touted pro-crypto policies, with the president promising to make the United States the “crypto capital of the world.”

But bitcoin — the world’s largest cryptocurrency by market value — has whipsawed in price and struggled to regain ground in recent months amid a series of sell-offs.

While stocks and bitcoin were lower, gold and silver surged higher, extending recent bouts of volatility. Gold futures gained 6.8% to $4,967 a troy ounce. Silver futures soared 10% to roughly $84.78 a troy ounce.

Gold, considered a haven amid uncertainty, has now outpaced bitcoin across the past five years, according to FactSet data.

“[Bitcoin’s] divergence from gold is a sign that most investors currently view gold as the dominant store-of-value asset, especially in periods of currency debasement, geopolitical turmoil and uncertainty over macroeconomic conditions,” Gerry O’Shea, head of global market insights at Hashdex, said in an email.

O’Shea said he expects continued near-term volatility for bitcoin as the crypto industry seeks more regulatory clarity and crypto integrates into mainstream financial infrastructure, but he thinks bitcoin’s appeal will increase.

Stocks were led by declines in shares of many technology and artificial intelligence companies. Tech stalwarts Microsoft (MSFT) and Amazon (AMZN) fell 3.2% and 2.4%, respectively. Nvidia (NVDA), the star of the AI trade, fell 4.1%, weighing on markets.

There have been lingering concerns on Wall Street about just how profitable the AI boom will prove to be, and whether companies’ enormous amounts of spending will ultimately be justified. Microsoft shares dropped 10% on Thursday, erasing nearly $360 billion in market value, after the company reported less growth in cloud sales than expected and increased AI spending.

Wall Street is in the midst of corporate earnings season, and traders are digesting results for the last quarter. Investors are increasingly scrutinizing spending forecasts and focusing on how companies will be able to turn a profit to justify their expenditures.

Meanwhile, shares of software companies also fell amid nerves about developments in AI eating into their business models. Salesforce shares (CRM) were down 8%.

While markets were lower, Walmart shares (WMT) gained 2.1%, lifting the company’s market value above the $1 trillion mark for the first time.

Markets extended their losses and volatility picked up after reports that the United States shot down an Iranian drone that had been approaching a US aircraft carrier.

Wall Street’s fear gauge, the VIX, jumped 19%. The VIX briefly traded at 20 points, a threshold that signals elevated volatility in markets.

Oil futures rose amid escalating US-Iran tensions. Brent crude, the international benchmark, was up 1.9% to $67.56 a barrel. West Texas Intermediate, the US benchmark, rose 2.17% to $63.48 a barrel.

The US dollar index was down 0.23%, pausing gains after a strong two-day rebound.

Source: CNN

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James Riley

Remarks of Officials

Political

President Donald Trump’s call for Republicans to “nationalize” U.S. elections has sparked sharp criticism from lawmakers, including some in his own party. Democrats, meanwhile, are voicing renewed alarm that the move signals an intent to interfere with the upcoming November midterm elections, which will decide control of Congress.

In a podcast interview released Monday, Trump repeated his false claims of a stolen 2020 election and declared that his party should “take over” and “nationalize” voting in at least 15 locations, though he did not specify what that would entail.

Under the U.S. Constitution, state and local governments are responsible for administering elections, not the federal government. Democratic officials and voting rights advocates argue Trump's comments are part of a plan to undermine or manipulate this year's results.

"This is not about the 2020 election," Democratic Senator Mark Warner of Virginia stated at a press conference. "This is frankly about what comes next."

Republican Leaders Oppose Federal Control

While Trump’s base has embraced his calls to overhaul the nation's voting systems, key Republican leaders pushed back on the idea of federalizing elections.

Senate Majority Leader John Thune told reporters he was "not in favor of federalizing elections." He defended the current system, noting, "I'm a big believer in decentralized and distributed power. It's harder to hack 50 election systems than it is to hack one."

House Speaker Mike Johnson argued that a federal takeover was unnecessary but maintained that Trump's concerns about election integrity were justified. The White House later clarified that Trump wants Congress to pass the SAVE Act, a Republican bill that would impose new voter ID and citizenship verification requirements.

"The president believes in the United States Constitution," said press secretary Karoline Leavitt. "However, he believes there has obviously been a lot of fraud and irregularities that have taken place in American elections."

A High-Stakes Midterm Election Looms

The controversy comes just months before the critical midterm elections. Historically, the president's party tends to lose seats, and Democrats need to flip just three Republican-held districts to win control of the House of Representatives.

Election experts warned against dismissing the president's rhetoric. "The last time he started talking like this, his allies minimized the risks and we ended up with Jan 6," wrote Brendan Nyhan, a political science professor at Dartmouth College, referencing the 2021 attack on the U.S. Capitol.

Some of Trump’s allies have suggested he could use federal funding as leverage. The government provides states with hundreds of millions of dollars annually for election administration, including cybersecurity and voting equipment. Allies believe Trump might threaten to withhold these funds from states that resist new voting measures like ID requirements or restrictions on mail-in ballots.

Scrutiny Mounts Over FBI Search in Georgia

Concerns were amplified by recent events in Fulton County, Georgia, a key battleground in Trump’s 2020 efforts to overturn the election. Last week, the FBI executed a search warrant for 2020 ballots in the county's election office.

Alarmingly for Democrats, Tulsi Gabbard, the director of national intelligence, was present during the search. The involvement of the DNI in a domestic election operation without a clear foreign threat is highly unusual and raised immediate red flags.

Senator Warner, who co-chairs the Senate Intelligence Committee, said Gabbard’s office had not notified Congress of any foreign threats to election infrastructure. He criticized her appearance in Georgia as an act that "politicizes an institution that must remain neutral and apolitical."

In a letter to Warner and Congressman Jim Himes, Gabbard stated that Trump had requested her presence at the FBI operation. She also asserted her legal authority to coordinate and analyze election security matters. This follows her comments at an April cabinet meeting where she announced her office was investigating election integrity issues, claiming electronic voting systems are "vulnerable to exploitation."

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Isaac Bennett

Remarks of Officials

Political

NATO confirmed on Tuesday that it is planning a new mission in the Arctic, a move that comes just weeks after U.S. President Donald Trump created friction within the alliance by insisting the U.S. needed to control Greenland. Trump cited unverified security threats from Russia and China as justification for his stance.

NATO forces conduct a training exercise near the Arctic Circle.

"Arctic Sentry": What We Know So Far

Martin O'Donnell, a spokesperson for NATO's Supreme Headquarters Allied Powers Europe, announced that a "NATO enhanced vigilance activity" is being developed to "further strengthen NATO's posture in the Arctic and High North." As planning has just begun, he did not provide additional details.

The location for the exercises remains unclear. This initiative is separate from the ongoing NATO exercise in Greenland, "Operation Arctic Endurance," which is currently led by Denmark.

Germany's Spiegel newsmagazine first reported on the plans, revealing that NATO's commander, U.S. General Alexus G. Grynkewich, had ordered the development of a mission titled "Arctic Sentry." According to the report, NATO defense ministers may convene in Brussels in the coming weeks to discuss the preliminary operation plans.

The Trump Factor: Greenland in the Spotlight

The push for a stronger NATO presence follows a period of diplomatic strain. In the lead-up to the World Economic Forum in Davos last month, President Trump suggested he might use force to acquire Greenland, a strategically valuable Arctic island.

The White House did not retract these claims, with the president later repeating his assertion that the U.S. would "have" Greenland "one way or the other."

The statements put Washington's European allies in a difficult position, forcing them to balance their support for Denmark's sovereignty over Greenland with the need to avoid further antagonizing Trump and risking the integrity of the defense alliance.

Diplomatic Fallout and Ongoing Talks

Tensions appeared to ease after Trump met with NATO Secretary General Mark Rutte at Davos. Following the meeting, Trump announced he had secured a "framework" deal to protect U.S. interests and seemed to back away from his threats of force.

Rutte confirmed he had discussed with Trump how NATO allies could work together to ensure Arctic security. However, the specific details of the deal mentioned by Trump have not been made public.

Despite the apparent de-escalation, Greenland remains cautious. On Monday, Prime Minister Jens-Frederik Nielsen warned that the U.S. is still pursuing "paths to ownership and control over Greenland."

Last week, senior officials from the U.S., Denmark, and Greenland initiated diplomatic talks. According to Denmark's foreign ministry, the discussions aim to "address American concerns about security in the Arctic while respecting the Kingdom's red lines."

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Manuel

Political

Economic

A four-day partial US government shutdown is set to end within hours after the House of Representatives approved a funding measure and sent it to President Trump's desk for his signature.

The vote in the House came down to the wire and ended with a tally of 217-214. After a day of arm-twisting, Republicans unified on a key procedural step earlier in the day, which set up the narrow bipartisan vote Tuesday afternoon for final approval.

The final vote saw 196 Republicans join 21 Democrats to push the measure over the line and send it to White House, where press secretary Karoline Leavitt reaffirmed Tuesday afternoon that the president would sign it.

Tuesday's vote follows the Senate's 71-29 passage of the measure last week and a White House pressure campaign that pushed House Republican holdouts over the line.

The bill contains five spending measures while delaying a final decision on funding the Department of Homeland Security until next week.

Trump's signature would mean that key government functions will reopen soon — but only after a delay in the January jobs report was announced on Monday. The Job Openings and Labor Turnover Survey (JOLTS) for December 2025 was also scheduled to be released on Tuesday, but was likewise delayed.

All told, funding for departments including the Pentagon, State, Transportation, and others will be authorized until Sept. 30 once the deal is enacted. Other areas in focus for markets — from the Federal Aviation Administration to the Internal Revenue Service — would be able to fully come back online, with minimal disruptions expected.

The politically charged funding for the Department of Homeland Security will be on a separate track, with funding extended only until Feb. 13. A fierce debate is expected over new restrictions for US Immigration and Customs Enforcement (ICE) in particular.

The movement on the bill came after President Trump himself stepped in to get his party in line.

"There can be NO changes at this time," Trump posted on Truth Social Monday before meetings and calls that led Republican opposition to largely crumble.

Two key GOP holdouts were Anna Paulina Luna of Florida and Tim Burchett of Tennessee, who had been looking to attach a separate election bill to the package.

They backed down, they said, after a White House meeting Monday evening that gave them assurance that their bill could be addressed separately.

"Rep. Luna and myself are now willing to allow that to happen," Burchett told reporters of the key vote to approve a rule for debate and a final vote on the bill.

Tuesday's back-and-forth will be far from the end of the wrangling on Capitol Hill over Homeland Security. Democrats are demanding a series of changes in how immigration operations in Minneapolis and elsewhere are carried out in exchange for funding.

Some progress could be forthcoming after Homeland Security Secretary Kristi Noem announced late Monday that "every officer" in Minneapolis will soon wear a body camera.

Source: Yahoo Finance

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Manuel

Commodity

Copper rebounded as a metals selloff led by silver and gold eased and a state-backed industry group called for China to boost its strategic reserves of the crucial industrial metal.

China should expand the size of the reserves and also work with major state-owned producers to boost commercial stockpiles, according to the China Nonferrous Metals Industry Association, which held an annual briefing to review trends in the sector on Tuesday.

Prices rose as much as 4.9% to $13,526 a ton on the London Metal Exchange, following an 11% plunge from a record high last Thursday to Monday’s close. Other base metals also climbed on the LME, while gold and silver rallied sharply. Copper Rebounds as China Industry Group Calls for Stockpiling_1

Copper Rebounds as China Industry Group Calls for Stockpiling_1

Prices had already been rallying ahead of the remarks on stockpiling amid signs of dip-buying from investors in China, the biggest consumer of the metal. Fabricators and manufacturers in the country also returned after weeks away from the heated market, replenishing stocks ahead of this month’s Lunar New Year holiday.

“Fabricators are willing to step in and buy when there is a correction of more than 10%,” said Li Xuezhi, head of research at Chaos Ternary Futures Co. Funds will also come in to buy the dip for copper with strong fundamental support, he added.

Investors have been piling into metals amid doubts about the US dollar and a shift away from currencies and sovereign bonds, driving frenzied price rallies across the commodities complex in January. Copper’s rally comes after it jumped more than 40% in 2025.

However, drivers for additional price increases in the near term have weakened, Li said, citing uncertainty over the direction of US monetary policy and easing risks of a supply squeeze on the LME.

Spot prices traded at a discount to the three-month benchmark contract on the LME in a contango structure that signals ample near-term supplies. Meanwhile, large premiums on Comex contracts over those on the LME have disappeared, discouraging metal flows to the US ahead of potential import tariffs which had drained supplies elsewhere.

Copper was up to settle at $ a ton on the LME. Tin climbed and aluminum was up .

Source: Bloomberg

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Henry Thompson

Remarks of Officials

Daily News

Economic

Stocks

Nvidia CEO Jensen Huang discusses the future of technology and AI at the World Economic Forum in Davos.

Nvidia CEO Jensen Huang has reaffirmed the company's plan to invest in OpenAI, directly pushing back on recent reports suggesting the landmark deal was in jeopardy.

"There's no drama involved. Everything's on track," Huang stated in a Tuesday interview with CNBC's Jim Cramer. His comments came as Nvidia's stock fell over 3.4% amid a wider tech sell-off, with shares now trading 13% below their October peak.

The $100 Billion AI Deal Under Scrutiny

The partnership first made headlines in September when Huang and OpenAI CEO Sam Altman announced a letter of intent. The plan outlined a staggering investment of up to $100 billion from Nvidia into the AI research lab, which would use the funds to build out AI infrastructure powered by Nvidia technology and requiring up to 10 gigawatts of power.

However, doubts began to surface. An SEC filing in November revealed the deal had not been finalized. The speculation intensified over the past weekend after a Wall Street Journal report claimed the agreement was "on ice."

Huang's Commitment to Future Funding

In his latest remarks, Huang sought to end the uncertainty by confirming Nvidia's participation in OpenAI's next fundraising round, which he described as potentially the "largest private round ever raised in history."

Last month, reports indicated that OpenAI was in discussions for a new funding round that could raise as much as $100 billion.

"We will invest in the next round," Huang said unequivocally. "There is no question about that." He also noted that Nvidia would be open to investing in subsequent rounds and would want to participate if OpenAI pursues an eventual IPO.

Navigating a Shifting Chip Landscape

The relationship between the two tech giants is foundational, as OpenAI has historically relied on Nvidia's graphics processing units (GPUs) to train and run its powerful AI models like ChatGPT.

Yet, recent commentary from Sam Altman has highlighted a critical bottleneck: a shortage of AI chips. Altman has stated that OpenAI could generate significantly more revenue if it had greater access to computing power. In response, OpenAI has started to diversify its supply chain, striking deals with Nvidia's competitors, including Advanced Micro Devices, Broadcom, and Cerebras.

Despite these moves, Altman publicly dismissed any notion of a rift. In a post on X on Monday, he clarified his company's position.

"We love working with NVIDIA and they make the best AI chips in the world," Altman wrote. "We hope to be a gigantic customer for a very long time. I don't get where all this insanity is coming from."

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