US – China Truce Extended as Trump Threatens Secondary Tariffs

Yields flat across the curve ahead of tomorrow’s inflation data. UST yields traded within a tight 3 bp range and closed nearly flat in today’s relatively quiet session. 2-year and 10-year yields are now at 3.77% and 4.29%, respectively, within 17-30 bps of their YTD lows. Markets are largely looking ahead to tomorrow’s CPI data, where both core readings are expected to show a slight rise in inflation. Meanwhile, Bitcoin temporarily rallied past $122,000, nearing its all-time high set in July.

US – China trade truce extended. The US and China agreed to extend their current truce for 90 days ahead of tomorrow’s deadline. The deal fueled optimism that the the two countries will avoid a prolonged trade war, as they have additional time to discuss unresolved issues such as fentanyl trafficking and purchases of Russian oil. Trump recently threatened China with a secondary levy for its Russian oil purchases, and the Chinese Foreign Ministry has pushed back on the threat. They stated, “It is legitimate and lawful for China to conduct normal economic, trade and energy cooperation with all countries around the world.” Trump’s top adviser, Peter Navarro, cautioned that such a move “may hurt the US.”

Bessent expands the list of potential Fed chair candidates. After it broke last week that Fed Governor Christopher Waller was Trump’s top choice for chair, new reports claim there are more candidates in consideration. Treasury Secretary Scott Bessent is said to be creating a short-list to pass along to President Trump for a final decision this fall. The list is rumored to include Michelle Bowman, Philip Jefferson, Lorie Logan, James Bullard, Kevin Hassett, Kevin Warsh, and Waller. However, Trump is limited to nominating a current board member unless sitting Fed Chair Jerome Powell leaves the Central Bank in May, thereby leaving a vacant governor’s seat. Powell has not indicated what he intends to do.