U.S. Doubles India’s Tariff Rate

Yield curve steepens slightly following another Treasury auction. Treasury volatility was relatively muted today in a quiet session, though longer-term yields rose 2-4 bps on weak demand at a $42B 10-year UST auction. The 10-year yield closed 2 bps higher at 4.23%, and tomorrow’s 30-year auction could fuel another sell-off as markets absorb another wave of supply. Meanwhile, the policy sensitive 2-year yield traded within a 5 bp range today and closed 1bp lower at 3.71%. Equities ended higher today with the S&P 500 up 0.73% and the NASDAQ up 1.21% as big tech led gains.

Minneapolis Fed President Neel Kashkari sees two rate cuts by year-end. Speaking on CNBC this morning, Kashkari cited the recent weakening of the labor market and a slowing economy as reasons to cut policy rates. He said, “In the near term it may become appropriate to start adjusting the federal funds rate.” Kashkari acknowledged lingering uncertainty surrounding the impact of tariffs on inflation, but still believes that it may be better to act on rate cuts now, even if a reversal must be taken later in response to tariff-driven inflation. 

Trump increases tariffs on India to 50% for purchasing Russian oil. President Trump today followed through on his threat to increase tariffs on India as punishment for their continued purchases of Russian oil. Trump announced a 25% tariff will be added to the originally agreed upon 25% duty going into effect tomorrow. The new levy, which will bring India’s total tariff rate to 50%, is set to begin in 21 days. The White House announced India’s rate hike after talks with Moscow failed to yield immediate progress towards an agreement on Ukraine. Trump claimed India’s oil purchases are “fueling the [Russian] war machine,” though a spokesperson for India’s Ministry of External Affairs labeled the targeted attacks unfair. India also called out the U.S. and EU for hypocrisy as both nations continue to import other Russian goods.