Yields flat as focus turns to tomorrow’s payrolls report. Treasury yields ended the day nearly unchanged, though yields initially fell 4-6 bps from intraday highs following Fed Chair Kevin Warsh’s morning remarks that inflation risks are easing. The 2-year yield closed flat at 4.17%, while the 10-year yield closed 1bp higher at 4.48%. Market focus now shifts to tomorrow morning’s nonfarm payrolls report, which is expected to show 115k jobs added in June. Meanwhile, equities slipped today as investors dumped semiconductor and cloud-computing names, with the NASDAQ and S&P 500 closing 0.66% and 0.22% lower, respectively.
Warsh pledges price stability, defends Fed independence. Fed Reserve Chair Kevin Warsh spoke today at the ECB Forum on Central Banking, promising that the Fed was “going to deliver price stability.” As US inflation hit its highest levels since 2023 in May, Warsh was clear about his intention to return it to the Fed’s 2% target. He stated that falling energy prices, due to easing tensions in Iran, have already helped reduce some inflation risk. On the question of Fed independence, a topic that drew attention following President Trump’s attempt to remove Fed Governor Lisa Cook, Warsh reaffirmed the central bank’s commitment to operating free from political influence. He also offered an optimistic view on AI, saying, “The jobs will be great, prosperity will be stronger.”
US declines to renew USMCA. The Trump administration announced that it will not renew the US-Mexico-Canada Agreement and will instead opt to conduct annual reviews of the pact. US Trade Representative Jamieson Greer said that the administration is “not prepared to rubber stamp the agreement,” given that “We think there are substantial issues.” Years of negotiations are now likely to occur on a variety of rules, though the USMCA will remain in effect for another decade, unless one country decides to exit the agreement entirely. In recent times, the USMCA has created stability for trade between the three nations as it restricted the trade tariffs President Donald Trump could impose and today’s decision creates added uncertainty for North American businesses.
