U.S. and Vietnam Reach Trade Agreement

U.K. bond sell-off pushes U.S. yields higher. After weak ADP employment data spurred a decline in Treasury yields this morning, price action reversed course on headlines from the U.K. 30-year U.K. gilt yields rose over 20 bps after Prime Minister Keir Starmer did not confirm that Chancellor of the Exchequer, Rachel Reeves, would retain her role. Long-term U.S. yields rose as well, with the long end of the curve closing 4 bps higher while the short end closed within 2 bps of opening levels. The U.S.- Vietnam trade deal, announced today, may have also contributed to the bear steepening due to expectations for economic growth. The deal pushed U.S. equities higher, with the NASDAQ up 0.94% while the S&P 500 climbed 0.47%.

U.S. private employment unexpectedly fell in June. Ahead of tomorrow’s broader labor slate, June ADP employment data created concerns about an impending labor market slowdown. Employment at private U.S. companies fell by 33k in June, the first decline in more than two years and well below the +98k estimate. Nela Richardson, chief economist at ADP, said, “Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month.” Meanwhile, nonfarm payrolls is expected to decline to 110k in June from 139k previously, another sign that hiring growth may be slowing. The unemployment rate is expected to rise to 4.3% from 4.2%, which would be the highest rate since October 2021.

U.S. reaches trade deal with Vietnam. The U.S. and Vietnam announced a sweeping trade deal today that includes a 20% U.S. tariff on Vietnamese imports while Vietnam will remove all tariffs on U.S. goods, per a social-media post from President Trump. He added, “In other words, they will ‘OPEN THEIR MARKET TO THE UNITED STATES’ meaning that we will be able to sell our product into Vietnam at ZERO tariff.” As observed with other recently announced trade agreements, finer details are still unclear. The White House hasn’t issued a formal press release nor published more formal terms of the agreement, despite the President’s social-media post. Last year, Vietnam was the sixth-biggest goods exporter to the U.S., and had the third highest trade surplus with the U.S.