US Bonds Rise as Soft Inflation Backs Bets on Two 2025 Fed Rate Cuts

Economic

Bond

Summary:

The US government bond market erased gains that were spurred by April inflation data that showed smaller increases in consumer prices than economists estimated.

Treasury debt slipped as gains for US stocks reinforced the broadening conviction on Wall Street that Federal Reserve interest-rate cuts are unlikely before December.

The US government bond market erased gains that were spurred by April inflation data that showed smaller increases in consumer prices than economists estimated. The two-year note’s yield, more sensitive than longer maturities to expected changes in the Fed’s rate, was little changed at about 4.02% after earlier dipping to 3.95%.

While derivative contracts continue to price in two quarter-point rate cuts by the Fed this year, several major Wall Street banks this week forecast a rate cut in December, later than they previously anticipated. The changes were based on the US trade truce with China announced Monday, which along with comments by President Donald Trump during a US-Saudi investment forum in Riyadh drove gains for US stocks.

“Some money is moving out of Treasuries and into risk assets,” said Tony Farren, managing director in rates sales and trading at Mischler Financial Group. “It’s a bit of a momentum trade for now.”

Trump said Saudi Arabia would commit to investing $1 trillion in the US and predicted further gains for the stock market.

Also contributing to the selloff, Farren said, is investor concern about the US fiscal outlook. On Monday, the Republican majority in the House of Representatives unveiled a draft tax bill that’s estimated to result in a $3.7 trillion revenue loss over 10 years.

“The other big part of the inflation story going forward is the fiscal stimulus that’s beginning to emerge on Capitol Hill,” David Kelly, chief global strategist at JPMorgan Asset Management, said on Bloomberg Television. “Inflation’s going to move up in the short run because of tariffs, and then in 2026 because of renewed fiscal stimulus.”

Yields on 10- to 30-year bonds climbed by several basis points to the highest levels in a month. In the interest-rate options market, traders showed a bias for wagers that profit if long-maturity yields rise. The Bloomberg Dollar Spot Index fell 0.5%, erasing about half of its Monday gain.

A heavy slate of new investment-grade corporate bonds — another sign that investors are embracing risk after avoiding it for several weeks after the trade war broke out in early April — was also a factor.

Meanwhile, the inflation outlook remains cloudy, despite the April consumer price index data.

While the Trump administration’s tariffs are widely expected to boost inflation, companies may still be working their way through a massive stockpile of built-up inventory before resorting to raising prices.

“The bond market still has concern over stability of core goods prices in the coming two data cycles.” said Ian Pollick, head of fixed income, commodities and currency strategy at CIBC. “And given the Fed requires the labor market to turn prior to easing, a weaker print today matters very little for the level of yields.”

Even before the release of the CPI data — which had the potential to affect expectations for when the Fed might resume the rate cuts it began last year — several big-bank economists this week became less sanguine about the prospect of lower rates.

Goldman Sachs on Monday projected a cut in December, a change from July, and less frequent subsequent cuts. Barclays also changed also changed to December from July, and JPMorgan Chase & Co. revised its call to December from September. Citigroup economists shifted their prediction to July from June.

Trade tensions may yet prove damaging to the US economy, even as the temporary reprieve has been a boon to sentiment.

“On balance, particularly for the Fed as well, it does mean somewhat slower growth,” Michael Pyle, deputy head of BlackRock Inc.’s portfolio management group, said on Bloomberg Television. “The tariffs that remain will have to be absorbed either in prices or margins, and that changes the outlook for what we can expect in terms of growth and profitability in the US.”

Source: Bloomberg

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

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Manuel

Commodity

Energy

Crude oil futures climbed more than $1.60 a barrel on Tuesday, lifted by a temporary cut in U.S.-China tariffs and a better-than-expected inflation report.

Brent crude futures settled at $66.63 a barrel, up $1.67, or 2.57%. U.S. West Texas Intermediate (WTI) crude finished at $63.67, up $1.72 or 2.78%.

The two benchmarks rose by about 4% or more in the previous session after the U.S. and China agreed on sharp reductions to their import tariffs for at least 90 days, which also boosted stocks on Wall Street and the dollar.

"We didn't participate as much as other markets did yesterday in the China boom, so we're catching up today," said John Kilduff, a partner with Again Capital LLC. "Also the data this morning gives the Fed room to potentially begin making some moves."

The U.S. Labor Department reported on Tuesday that the Consumer Price Index rose 2.3% in the 12 months through April, the smallest year-over-year gain in four years, leading Wall Street firms like JPMorgan Chase and Barclays to cut their forecasts of a U.S. recession in the coming months.

The tamer inflation reading will likely be greeted with some relief by the Federal Reserve, which has kept its benchmark interest rate unchanged since last cutting it in December. The U.S. central bank has paused its rate cuts amid concerns that the trade war could reignite inflation.

"All the numbers are bullish today," said Phil Flynn, senior analyst with Price Futures Group. "The inflation number, the economic data are very supportive."

The Organization of the Petroleum Exporting Countries and its allies, a group called OPEC+, are planning to boost oil exports in May and June, which is seen as possibly limiting oil's upside.

OPEC has raised oil output by more than previously expected since April, with its May output likely to increase by 411,000 barrels per day.

Meanwhile, sources told Reuters that Saudi Arabia's crude oil supply to China will hold steady in June after hitting its highest level in more than a year in the previous month after an OPEC+ decision to increase output.

The kingdom is the second-largest crude supplier to China behind Russia.

Elsewhere, signs broadly point to demand for refined fuel remaining strong.

"Despite the deteriorating outlook for crude demand, positive signals from the fuel markets cannot be overlooked," JPMorgan analysts said in a note.

"Although international crude prices have declined by 22% since their peak on January 15, both refined product prices and refining margins have remained stable."

Reduced refining capacity - mostly in the U.S. and Europe - is tightening gasoline and diesel balances, increasing reliance on imports and raising susceptibility to price spikes during maintenance and unplanned outages, they added.

Source: Reuters

Risk Warnings and Disclaimers

Add to Favorites

Adam

Economic

Two of Europe's major stock exchange operators are stepping up efforts to retain local initial public offerings in the face of U.S. competition, with marketing and research challenging the perception that New York-listed companies fetch higher valuations.

Stock exchanges in Europe and the UK have been hit by a drought of IPOs over the past two years and a number of local firms choosing to float or move primary listings to the U.S. for its deeper pools of capital and potentially higher valuations.

Deutsche Boerse, which operates the Frankfurt Stock Exchange, is warning of sluggish post-IPO performance, higher costs and the threat of litigation for firms that list in the U.S., according to a document shared with German companies and IPO advisers in recent weeks, and Reuters.

It found that about two-thirds of companies that listed in Europe, including Germany, rose on their first day of trading, while only about half of European companies that listed in the U.S. gained on their market debuts. Over time the IPOs from the region also fared better in Europe than in the United States.

The data doesn't mention valuation at IPO, but the exchange highlighted in its report several examples of European-listed companies trading at a premium to U.S.-listed peers.

Euronext, which operates seven markets in cities including Amsterdam and Paris, is also planning to reissue a similar paper challenging the belief that U.S.-listed firms attract higher valuations than their European peers, its spokesperson told Reuters.

"We really see more a competition, if you will, between Europe and the U.S. market in terms of listings, rather than within Europe," Stefan Maassen, head of capital markets and corporates at Deutsche Boerse told Reuters.

Exchanges earn fees from companies that list on their platforms and from brokers for trading of securities, and are seen as critical by policymakers to attract investment.

DEEPER MARKETS

European officials have been looking for ways to deepen the continent's capital markets as the depth and size of U.S. markets are a draw for those eyeing a listing.

The S&P500 index has a market capitalisation of $49.5 trillion, almost four times that of Europe's Stoxx 600, according to LSEG data based on Monday's closing prices.

European officials are also considering new listing rules to improve access to financing.

The efforts by Deutsche Boerse and Euronext to curb New York's allure for European firms echo those of the London Stock Exchange which circulated a “mythbusting” document in March, questioning the perception that U.S.-listed companies attract higher valuations than those in London.

Deutsche Boerse also said in its document it found that the share prices of U.S. listed German companies have fallen 13% on average since 2004, naming internet company trivago and retailer Mytheresa which have both fallen since floating, while issuers in Frankfurt saw a 24% rise.

Around 130 European companies worth a combined $667 billion opted to either float or move their primary listing to the United States over the past decade, according to research by capital markets think tank, New Financial.

However, 70% of those are trading below their listing price with an overall average fall of 9%, according to the think tank.

"We need to make our advantages more visible, and not just globally, but finally also on our own doorstep," Deutsche Bank CEO Christian Sewing said on Tuesday in a speech in Berlin, commenting on the relocation of European company listings to the U.S.

Deutsche Boerse warned cross-border listed companies face potentially greater risks of lawsuits. To be sure, some market participants argue the risk of litigation gives shareholders paths to redress.

Tariff-induced turmoil roiling U.S. markets could also lift the appeal of European markets, exchange executives say.

Some market players, like Eva-Maria Wiecko, Head of Equity Market Solutions, Germany and Austria at Rothschild & Co, are more sceptical.

While the U.S. equity market has seen inflows in recent years, European markets have largely experienced outflows.

"The recent re-balancing is only a fraction of these numbers, underscoring the continued relative strength of the U.S. market," Wiecko said.

Source: Reuters

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

Risk Warnings and Disclaimers

Add to Favorites

Manuel

Economic

President Donald Trump announced on Tuesday that the U.S. will lift long-standing sanctions on Syria, and secured a $600 billion commitment from Saudi Arabia to invest in the United States on a trip to the Gulf.

The U.S. agreed to sell Saudi Arabia an arms package worth nearly $142 billion, according to the White House which called it "the largest defense cooperation agreement" Washington has ever done.

The surprise announcement about sanctions on Syria would be a huge boost for a country that has been shattered by more than a decade of civil war. Rebels led by current President Ahmed al-Sharaa toppled President Bashar al-Assad last December.

Speaking in Riyadh, Trump said he was acting on a request to scrap the sanctions by Saudi Arabia's de facto ruler, Prince Mohammed bin Salman.

"Oh what I do for the crown prince," Trump said, drawing laughs from the audience. He said the sanctions had served an important function but that it was now time for the country to move forward.

The United States declared Syria a state sponsor of terrorism in 1979, added sanctions in 2004 and imposed further sanctions after the civil war broke out in 2011.

Syrian Foreign Minister Asaad Shibani said on X that the planned move marked a "new start" in Syria's path to reconstruction. Trump has agreed to briefly greet Sharaa in Saudi Arabia on Wednesday, a White House official said.

Trump and the Saudi crown prince signed an agreement covering energy, defense, mining and other areas. Trump has sought to strengthen relations with the Saudis to improve regional ties with Israel and act as a bulwark against Iran.

The agreement covers deals with more than a dozen U.S. defense companies in areas including air and missile defense, air force and space advancement, maritime security and communications, the fact sheet said. The Saudi prince said the deal included investment opportunities worth $600 billion, including deals worth $300 billion that were signed during Trump's visit.

"We will work in the coming months on the second phase to complete deals and raise it to $1 trillion," he said.

Saudi Arabia is one of the largest customers for U.S. arms.

Reuters reported in April the U.S. was poised to offer the kingdom an arms package worth well over $100 billion.

"I really believe we like each other a lot," Trump said during a meeting with the crown prince, Saudi Arabia's de facto ruler.

The U.S. and Saudi Arabia had discussed Riyadh's potential purchase of Lockheed F-35 jets, two sources briefed on discussions told Reuters, referring to a military aircraft that the kingdom is long thought to have been interested in.

It was not immediately clear whether those aircraft were covered in the deal announced on Tuesday.

Trump, who was accompanied by U.S. business leaders including billionaire Elon Musk, will go on from Riyadh to Qatar on Wednesday and the United Arab Emirates on Thursday.

He has not scheduled a stop in Israel, a decision that has raised questions about where the close ally stands in Washington's priorities, and the focus of the trip is on investment rather than security matters in the Middle East.

"While energy remains a cornerstone of our relationship, the investments and business opportunities in the kingdom have expanded and multiplied many, many times over," Saudi Investment Minister Khalid al-Falih said.

"As a result ... when Saudis and Americans join forces very good things happen, more often than not great things happen when those joint ventures happen," he said before Trump's arrival.

Trump told the investment forum that relations with Saudi Arabia will be even stronger.

He was shown speaking with Riyadh’s sovereign wealth fund governor Yaser al-Rumayyan, Aramco CEO Amin Nasser, and Falih as he toured a hall that showed off models for the kingdom’s flashy, multi-billion-dollar development projects.

Trump called the Saudi crown prince a friend and said they have a good relationship, according to a pool report from the Wall Street Journal, adding that Saudi investment would help create jobs in the U.S.

BIG INVESTMENTS

Business leaders at the investment forum included Larry Fink, the CEO of asset management firm BlackRock; Stephen A. Schwartzman, CEO of asset manager Blackstone; and Treasury Secretary Scott Bessent.

Musk chatted briefly with both Trump and the crown prince, who is otherwise known as MbS, during a palace reception for the U.S. president. Top U.S. businessmen including Musk, the Tesla and SpaceX chief, and OpenAI CEO Sam Altman joined Trump for a lunch with MbS.

MbS has focused on diversifying the Saudi economy in a major reform program dubbed Vision 2030 that includes "Giga-projects" such as NEOM, a futuristic city the size of Belgium. Oil generated 62% of Saudi government revenue last year.

The kingdom has scaled back some of its ambitions as rising costs and falling oil prices weigh.

Saudi Arabia and the U.S. have maintained strong ties for decades based on an ironclad arrangement in which the kingdom delivers oil and the superpower provides security in exchange.

Trump left Israel off his schedule, although he wants Israeli Prime Minister Benjamin Netanyahu to agree to a new ceasefire deal in the 19-month-old Gaza war.

Israel's military operations against Hamas in Gaza and Hezbollah in Lebanon, and its assassinations of the two Iran-allied groups' leaders, have at the same time given Trump more leverage by weakening Tehran and its regional allies.

U.S. and Iranian negotiators met in Oman at the weekend to discuss a potential deal to curb Tehran's nuclear program. Trump has threatened military action against Iran if diplomacy fails.

Trump told the investment forum he wants to offer Iran a new and better path toward a more helpful future. If no new nuclear deal is reached, he said, Tehran will face maximum pressure.

Trump's Middle East envoy, Steve Witkoff, said last week he expected progress imminently on expanding accords brokered by Trump in his 2017-21 first term under which Arab states including the UAE, Bahrain and Morocco recognised Israel.

Trump said it was his "fervent hope" that Saudi Arabia would soon sign its own normalization agreement with Israel, adding, "But you'll do it in your own time."

Still, Netanyahu's opposition to a permanent stop to the war in Gaza or to the creation of a Palestinian state makes progress on similar talks with the Saudis unlikely, sources told Reuters.

Source: Reuters

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

Risk Warnings and Disclaimers

Add to Favorites

Adam

Economic

China–U.S. Trade War

Tamer-than-expected inflation and a significant de-escalation of a U.S.-China trade war are easing fears of a sharp squeeze on American households and businesses in coming months, prompting Wall Street firms to pare predictions of a recession and giving the Federal Reserve room to leave interest rates where they are.

JP Morgan Chase and Barclays were among firms adjusting their forecasts on Tuesday to reflect a more benign economic trajectory after the United States and China reached a deal over the weekend to reduce the most punitive of the tariffs they had put on each other since early April.

JP Morgan economists now see the chance of a recession as less than 50%; Barclays economists no longer have recession in their forecast at all. Both had earlier expected high tariffs to hit consumers and firms hard, putting the brakes on spending and economic activity.

Financial markets also repriced after the U.S.-China agreement, slashing bets that the Fed would need to start cutting rates by July to cushion an economic downturn. Traders now see just two interest-rate cuts by year's end, beginning in September.

A Labor Department report Tuesday showing consumer prices rose 2.3% in April, the smallest year-over-year gain in more than four years, solidified those market bets and the expectation that Fed policymakers will deliver gradual rate cuts later in the year instead of taking earlier, more aggressive action.

"There's been a fear that tariffs are going to push inflation higher, and they may still, but today's data at least gives investors a sense of relief that inflation is still moving in the right direction," said Jake Dollarhide, CEO at Longbow Asset Management.

Still "uncertainty about tariff policies and implications for inflation going forward will keep them on the sidelines for now," wrote economists at Raymond James.

The Fed last week held short-term borrowing costs in the 4.25%-4.50% range, where they have been since December.

Fed Chair Jerome Powell said at the time that he saw so far no signal in the data of a crumbling economy, and with inflation still above the Fed's 2% target and trade policy evolving rapidly it was the right move to wait for more clarity before adjusting rates.

Fed to stay patient amid cooling trade war and inflation_1

Underlying consumer prices excluding volatile food and energy rose at a heated 2.8% year-over-year pace, Tuesday's data showed. Prices for some goods seen as vulnerable to tariff-driven price hikes, like apparel, cars and trucks, were flat or fell, bucking expectations even as more of U.S. President Donald Trump's new tariffs announced in March and April took effect.

Economists continue to expect in coming months to see goods prices rise due to tariffs, which were as high as 145% on Chinese imports until the detente over the weekend took the rate down to 30% for many of those goods. Even with that reprieve, tariffs are far higher and cover a broader range of imports overall than any time in the last 80 or so years.

The Trump administration has sealed only one trade deal since announcing its barrage of tariffs on April 2.

"With little clarity on the final status quo for trade policy and Fed policymakers unlikely to preempt any growth or inflation developments, we now only anticipate two Fed rate cuts (instead of three), and believe the first rate cut will come in September (instead of July)," wrote EY Chief Economist Gregory Daco.

Source: reuters

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

Risk Warnings and Disclaimers

Add to Favorites

Owen Li

Economic

U.S. President Donald Trump said on Tuesday he would order the lifting of sanctions on Syria at the behest of Saudi Arabia's crown prince, in a huge boost for interim Syrian President Ahmed al-Sharaa as he seeks to stabilise a country shattered by war.

Trump made the surprise announcement during a regional tour that began in Saudi Arabia. The White House said Trump would say hello to Sharaa during his Saudi visit, indicating a meeting between the president and a former al Qaeda commander who spent five years in a U.S. prison in Iraq would take place Wednesday.

Two sources from the Syrian presidency said Sharaa would travel to Riyadh to meet Trump.

The United States imposed tough sanctions on Syria during the rule of Bashar al-Assad, and had kept them in place since he was toppled from power in December after more than 13 years of war.

Saudi Arabia has been a leading voice calling for the sanctions to be lifted.

Trump said he would remove all sanctions against Syria, saying they had served an important function, but it was now time for Syria to move forward.

"I will be ordering the cessation of sanctions against Syria in order to give them a chance at greatness," Trump told an investment forum in Riyadh.

"It's their time to shine. We're taking them all off," Trump said, "Good luck Syria, show us something very special."

Sharaa was for years the leader of al Qaeda's official wing in the Syrian conflict, before he severed ties with the global jihadist network in 2016.

Hayat Tahrir al-Sham, the group Sharaa led and which was formally dissolved in January, is designated a terrorist organisation by the United States and the United Nations.

Source: Reuters

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

Risk Warnings and Disclaimers

Add to Favorites

Adam

Economic

Microsoft on Tuesday said that it’s laying off 3% of employees across all levels, teams and geographies.

“We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace,” a Microsoft spokesperson said in a statement to CNBC.

The company reported better-than-expected results, with $25.8 billion in quarterly net income, and an upbeat forecast in late April.

Microsoft had 228,000 employees worldwide at the end of June, meaning that the move will affect thousands of employees.

It’s likely Microsoft’s largest round of layoffs since the elimination of 10,000 roles in 2023. In January the company announced a small round of layoffs that were performance-based. These new job cuts are not related to performance, the spokesperson said.

One objective is to reduce layers of management, the spokesperson said. In January Amazon announced that it was getting rid of some employees after noticing “unnecessary layers” in its organization.

Last week cybersecurity software provider CrowdStrike announced it would lay off 5% of its workforce.

In January, Microsoft CEO Satya Nadella told analysts that the company would make sales execution changes after the company delivered slower growth than expected in Azure cloud revenue that wasn’t tied to artificial intelligence. Performance in AI cloud growth outdid internal projections.

“How do you really tweak the incentives, go-to-market?” Nadella said. “At a time of platform shifts, you kind of want to make sure you lean into even the new design wins, and you just don’t keep doing the stuff that you did in the previous generation.”

On Monday, Microsoft shares ended trading at $449.26, the highest price so far this year. They closed at a record $467.56 last July.