Bessent Stands by Powell, Sees China Trade Progress

Bessent fuels early morning volatility. Treasury yields declined ~4 bps from intraday highs shortly after Treasury Secretary Bessent offered support for Chair Powell. Volatility was muted thereafter, and rates traded within a 2 bp range throughout the remainder of the session. The 2-year yield (3.83%) and 10-year yield (4.34%) ultimately closed 3 bps lower today. Meanwhile, the S&P 500 extended its all-time high after a 0.06% gain, now at 6,310, while the DJI climbed 0.40%.

Bessent supports Powell’s chairmanship. Following yesterday’s critique of the Fed, Treasury Secretary Scott Bessent said today that “there’s nothing that tells me that [Powell] should step down right now,” and added, “He’s been a good public servant. His term is up in May. If he wants to see it through, I think he should. If he wants to leave early, I think he should.” Bessent’s tone in recent weeks has switched between defending the Fed and calling for probes into the institution, consistent with President Trump’s back-and-forth rhetoric. Some are concerned that continued criticism from the White House could erode public trust in the Fed, hampering its ability to effectively manage monetary policy.

U.S. – China trade negotiations progressing. Treasury Secretary Bessent said today that “trade is in a very good place with China” as the two nations continue to work on a deal. Bessent is set to meet with Chinese representatives next Monday and Tuesday in Stockholm, which will mark the third round of trade talks. The meeting will include a “likely” extension to the current 90-day trade deal with China, which expires on August 12th. Bessent also specified that the U.S. hopes China will “pull back on some of this glut of manufacturing that they’re doing and concentrate on building a consumer economy.”