Private Sector Hiring Exceeds Expectations

Rates rise on strong labor market data. Treasury yields were relatively flat this morning until JOLTs job openings came in at 7769k in May, well above the 7300k estimate and the highest level since November. Yields climbed ~5 bps in the immediate aftermath of the data, as the robust labor market could allow the Fed to continue their patient approach toward rate cuts. The policy-sensitive 2-year yield closed 5 bps higher today at 3.77%, still within 17 bps of YTD lows. The long-end of the curve closed within 2 bps of opening levels, with the 10-year now at 4.24% after a 1 bp rise.

Chair Powell says Fed would have cut more without tariffs. At a panel discussion today, Chair Powell said that if President Trump hadn’t broadened the use of tariffs, the Fed would have likely cut rates further in 2025. He said, “In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” adding that the best positioning for the Fed is to remain patient. However, Powell did not rule out the chance of a rate cut in July, saying, “We are going meeting by meeting…I wouldn’t take any meeting off the table…” The comments re-emphasized that the Fed is in a holding pattern given great uncertainty around the magnitude and timeline for tariff implementation, as well as their still-unclear impacts.

Trump tax bill passes Senate, but House vote remains uncertain. The Senate passed President Trump’s $3.3T “One Big Beautiful Bill” tax and spending cut bill today, and it will now head to the House for a vote. The Senate voted 51-50 to pass the bill, with VP Vance being the tiebreaker, but there is some doubt about the House vote. All democrats and some moderate republicans are concerned about Medicaid and other spending cuts, which total $1.2T, while further right-leaning republicans are in favor of larger spending cuts. However, House Majority Leader Steve Scalise said today that “We’re going to get it done tomorrow,” while Treasury Secretary Bessent said yesterday he is “confident” the bill will be passed.