USA-Russia Negotiations Fuel a Risk-On Session

Rates rise on USA-Russia negotiations. Markets were generally risk-on today following news that the US and Russia met in Saudi Arabia to discuss a potential end to the war in Ukraine. The US State Department said that the two sides left the meeting with the goal to end the conflict “as soon as possible in a way that is enduring, sustainable and acceptable to all sides.” Growing optimism contributed to higher demand for risk assets; Treasury yields rose 1-7 bps across a steepening curve while equities rebounded from earlier losses to close higher. The S&P 500 is currently at an all-time high of 6,129.58.

President Trump reveals plans for additional tariffs. Speaking at Mar-a-Lago today, President Trump said he will likely impose 25%+ levies on US automobile, drug, and chip imports. He added that the tariffs on pharmaceutical drugs and semiconductor chips will “go very substantially higher over a course of a year.” Trump alluded to future announcements to be made in early April, which provide companies “time to come in [to the US]” before the policies are enforced. The news follows last week’s announcements of reciprocal tariffs and levies on steel and aluminum, with the scope of tariffs continuing to grow.

Fed’s Daly reiterates that rates must remain restrictive. Following last week’s higher-than-expected consumer and producer inflation figures, San Francisco Fed President Mary Daly argued that “policy needs to remain restrictive until… I see that we are really continuing to make progress on inflation.” Daly caveated that she is not “discouraged” by the data, acknowledging that the battle against inflation is expected to be prolonged. Separately, Daly argued against comments from Fed Governor Christopher Waller that “Waiting for economic uncertainty to dissipate is a recipe for policy paralysis.” Daly countered, “We’re still actively investigating the data, thinking about where we’re heading. We just don’t have the answer right now.”