Daily Market Color July 23, 2025Tariff Deals Fuel a Risk-On Move Markets risk-on as tariff deals progress. Treasurys sold-off and equities rallied today on increased demand for riskier assets amid positive trade deal developments. Yields gradually climbed throughout the session, ultimately closing 2-5 bps higher across the curve. The 2-year yield is now at 3.88% after a 5 bp move, while the 10-year yield rose 4 bps to 4.38%. Meanwhile, the S&P 500 (6,359) hit a new all-time high after a 0.78% rally, while the DJI climbed 1.14%. US-Japan trade deal spurs optimism. The US and Japan reached a trade deal today, sparing the latter from the 25% tariff set to be imposed on August 1st. The deal set a 15% tariff on imports, including automobiles. Furthermore, Japan will accept cars built to U.S. regulatory standards—waiving more stringent requirements—which aims to boost American-made vehicle sales. The deal will also include a $550 billion Japanese investment in American projects. President Trump will have fund allocation discretion, and the U.S. will take 90% of any investment profits. Japan has also committed to purchasing $100 million in Boeing aircrafts, $8 billion in agricultural products, and to increase defense spending with U.S. companies. The EU is nearing a trade deal with the US. EU diplomats reported that they are approaching an agreement that would place a 15% baseline tariff on most products, though a 50% duty would still apply to steel and aluminum imports above a specific quota. Despite optimism about reaching an agreement, the outcome is difficult to predict. President Trump threatened 30% tariffs if a deal is not reached by August 1st, and the EU is prepared with countermeasures if negotiations fail. The EU’s response could include levies on $106 billion worth of American goods, with 30% rates to match Trump’s threat.
