Yields nearly flat as markets digest war developments. Treasury yields traded in a tight 3 bp range today following a weekend of escalating attacks in the Middle East. It’s reported that the US and Iran will engage in further peace talks this week, though markets await more concrete developments. The 2-year yield closed at 4.10% and the 10-year yield closed at 4.37%, both up 1bp on the day. Meanwhile, equities rose as technology stocks rallied, with the S&P 500 and NASDAQ closing 1.17% and 2.07% higher, respectively.
Supreme Court rules Lisa Cook will remain on Fed board. In a narrow 5-4 decision, the Supreme Court blocked President Donald Trump’s attempt to remove Fed Governor Lisa Cook, as she faced allegations of mortgage fraud. The case will now return to lower courts; however, Cook will remain in her seat for the time being. Chief Justice John Roberts wrote in the majority opinion that “to accept any of those arguments would in effect transform the Federal Reserve’s for-cause protection into at-will employment.” The ruling reaffirms the Fed’s for-cause protection, which effectively insulates the central bank from direct presidential control, setting it apart from other government agencies. Whether the Trump administration will ultimately be able to remove Cook remains unclear, though today’s decision should help ease concerns about the Fed’s independence.
Hormuz remains open despite weekend attacks. Vessel traffic continues in the Strait of Hormuz despite the US and Iran trading attacks in the region over the weekend. Reportedly, roughly two dozen ships have passed through the strait in the last 24 hours, however many appear to be transiting along the Omani coastline to avoid Iranian waters. On the diplomatic front, the US and Iran continue to release conflicting statements, with President Trump claiming talks will occur tomorrow in Qatar, while Iran maintains no talks are scheduled in the coming days. Fighting between Israel and Hezbollah has also continued in Lebanon, further complicating peace talks as Iran has stipulated Israel must fully withdraw from Lebanon as part of any deal with the US. Oil prices rose today in response to the weekend’s escalation, with Brent closing near $73 a barrel.
