Bessent Argues Policy Rates Should be 150 bps Lower

Yields lower as rate cut bets pile on. UST yields fell 6 bps in the morning on Treasury Secretary Scott Bessent’s comments that supported a 50 bp rate cut in September. The move reversed slightly in the afternoon, and yields closed 5-6 bps lower, with the 2-year yield at 3.67% and the 10-year yield at 4.23%. With no economic data today, volatility was muted and the VIX hit its lowest level since December. The S&P 500 and NASDAQ hit new all-time highs for the second day in a row.

Bessent calls for a series of rate cuts. Treasury Secretary Scott Bessent called on the Fed to cut rates by 50 bps at the September FOMC meeting to “make up for the delay and the lack of data,” referencing the downward revisions of May and June nonfarm payrolls. He continued, “If we had the original numbers, the Fed could have been cutting in June, July.” He described current Fed policy as too restrictive, saying the rate “should probably be 150-175 basis points lower.” Markets are now fully pricing in a rate cut at the September FOMC meeting.

India and China to rebuild economic ties following mutual trade tension with the US. India and China have started to revitalize economic ties that had run cold following a deadly border clash in 2020. After President Trump imposed a 50% tariff on India for purchasing Russian oil, Prime Minister Modi has worked to strengthen his country’s cooperation with China, now planning to visit President Xi for the first time in seven years. Meanwhile, India expects to resume direct flights to China as soon as next month, while China relaxes trade restrictions on urea, critical for India’s major fertilizer business. Modi has also increased his outreach with other BRICS nations, namely Russia and Brazil, inviting Putin to visit and speaking with Lula about trade expansion.