Waller Hints at Dissent if Fed Holds Rates in July 

Yields fall on Waller comments, decreasing inflation expectations. Fed Governor Waller offered dovish comments in a Bloomberg interview today, which largely fueled a 2-4 bp Treasury yield decline. Lower than expected University of Michigan inflation expectations also contributed, with the short term and long-term readings coming in at 4.4% (versus 5.0% est.) and 3.6% (versus. 3.9% est.), respectively. The 2-year yield closed at 3.87%, a 2 bp decline on the week, while the 10-year closed just under 4.42%, up 1 bp this week. Meanwhile, equities closed relatively flat, with the DJIA down -0.32% while the NASDAQ and S&P 500 closed within 0.05% of opening levels.

Fed Governor Waller hints at a July FOMC meeting dissent. Waller doubled down on his comments from yesterday that the Fed should cut policy rates at the July 30th meeting to support the labor market. He cited specific concerns about the private sector and argued, “most of the employment growth we saw last month was in the public sector, and that means the private sector is not doing particularly well.” Waller also suggested that he would dissent if other members voted to hold rates steady, which remains the likely outcome. Fed funds futures have a 25 bp rate cut priced in as 5% likely in July and 64% probable by the end of September’s meeting.

Cryptocurrency Market Tops $4 Trillion After Stablecoin Bill Passes. The House of Representatives passed the GENIUS Act today with bilateral support, which President Trump signed into law this afternoon. The bill aims to establish guardrails within the stablecoin sector, where there is currently a dearth of regulation. Advocates for the bill see it as a chance to increase consumer protection and pave a more direct path to cryptocurrency becoming a mainstream form of digital payment, however some argue the bill doesn’t go far enough to regulate the sector. Additional cryptocurrency legislation, namely the Clarity Act, also passed the House with bipartisan support this week and aims to regulate cryptocurrencies beyond stablecoins, largely by outlining the SEC’s governance jurisdiction. The Clarity Act now heads to the Senate for review. The GENIUS Act’s full impact on the value of the dollar remains to be seen, however since the vast majority of stablecoins are pegged to the U.S. Dollar, wider stablecoin adoption could prove a boon to U.S. Dollar strength.