Yields Rise Slightly While Tariffs Capture Headlines Again

Rates close marginally higher. Treasury yields rose 1-2 bps across the curve today as markets continue to digest tariff developments. This week’s rise has extended a ~17 bp climb from just a few weeks ago, which was largely spurred by strong labor data last Thursday. 2-year and 10-year yields are currently 3.89% and 4.40%, respectively. Meanwhile, markets are looking ahead to tomorrow’s FOMC minutes for clues about the Fed’s path forward.

President Trump stands firm on tariffs. After announcing new bilateral trade levies yesterday and extending the reciprocal tariff deadline from July 9 until August 1, President Trump insisted today that he will not offer additional extensions. He then added that the U.S. will enact a 50% rate on copper imports, which Commerce Secretary Lutnick said is “likely to be put in place end of July — maybe August 1.” The announcement fueled a spike in copper futures prices, and the generic contract closed over 13% higher today. Meanwhile, Trump floated a potential 200% tariff on pharmaceuticals, though he said there will be at least a year until those measures are enacted to allow companies time to adjust accordingly.

Inflation expectations come in lower than expected. NY Fed 1-year inflation expectations were over 0.10% below the median economic forecast at 3.02% in June. That marked the lowest level since January and a 0.18% decline from May. The decline comes after several Fed officials have suggested that initial expectations for tariff-driven inflationary pressures were overstated, which could allow for earlier Fed rate cuts. However, Chair Powell and many other Fed voters remain concerned that the price pressures, which are unlikely to have been fully realized, will have long-term consequences.