Bessent Calls for the Fed to Be Examined

Yields decline ahead of upcoming August 1st tariff deadline. Treasury yields declined gradually today and closed 1-5 bps lower across a flattening curve. Most of the move at the long-end occurred overnight, with the 10-year yield falling to an intraday low of 4.35%, its lowest level in nearly two weeks, before closing at 4.38%. The 2-year yield traded within a 4 bp range today before closing 1 bp lower at 3.86%. Meanwhile, equities were nearly flat ahead of a busy earnings calendar this week, which will include Magnificent Seven members Alphabet and Tesla. The S&P 500 climbed 0.14% and closed above 6,300 for the first time. 

Bessent questions the Fed’s effectiveness. Treasury Secretary Scott Bessent stated today that the Fed should be “examined” to determine whether the institution has “been successful.” He went on to say that “if [the FAA] were having this many mistakes, we would go back and look at why… All these PhDs [at the Fed], I don’t know what they do.” Bessent then accused the Fed of “fear-mongering over tariffs” despite tariffs still having a relatively muted impact on inflation. Bessent’s comments extended a string of anti-Fed rhetoric from the Trump administration, including President Trump’s calls to fire Chair Powell. In response, public figures such as JPM CEO Jamie Dimon and Senate Majority Leader John Thune have defended the Fed’s independence in recent days, with Dimon saying last week, “I think the independence of the Fed is absolutely critical.”

Trump threats against Russia followed by mixed progress. President Zelenskiy announced today that Ukraine and Russia are set to hold peace talks on Wednesday for the first time in seven weeks. That came despite fresh Russian attacks against Ukraine, which included the launch of 400+ drones and dozens of missiles. The mixed progress comes after President Trump threatened tariffs and sanctions against Russia last week if the two nations are unable to reach a peace agreement. Trump specified that the tariffs could reach 100% while also pledging additional weaponry to Ukraine.