Market Trends - Investors reacted to Donald Trump's April tariff announcements by selling American assets [1] - This selling pressure caused Treasury yields to increase and the dollar to depreciate [1] - The dollar has not recovered its value since April, indicating a lasting negative impact on its valuation [1]

Market Trends & Uncertainty - Treasury yields are reacting to renewed uncertainty surrounding the Federal Reserve's future, independence, and potential changes in monetary policy [1] - PPI data was mixed, with cooler-than-expected figures offset by later revisions, suggesting minimal impact on the overall economic landscape [2] - A headline about Mr Trump firing Pal caused market fluctuations, but the market reaction suggests the story isn't being taken very seriously [3][7] Bond Market Reaction - The 30-year Treasury yield hovered around 5%, then moved up to 507 and a half after the headline [3] - The 10-year Treasury yield moved from 444 to 448 and a half, a 45 basis points increase [4] - The two-year Treasury yield moved down from 391 to 386, showing a different reaction compared to the 10-year and 30-year yields, possibly influenced by cooler-than-expected PPI [5] Currency Market - The dollar index initially broke down from 9870 to 9780, a move of slightly less than a full cent, but quickly bounced back, indicating speculative forces at play [6] Overall Market Sentiment - The market is anticipating continued rhetoric and pressure from the administration, but the impact on the Federal Reserve's actions remains uncertain [7]

Treasury Market & Fiscal Policy - The market has largely priced in the impact of the "one big beautiful bill" (tax bill) [2][3] - Tariff revenues are projected to offset a significant portion of the tax bill's cost, with CBO projecting $28 trillion in tariff revenues versus the tax bill's $32 trillion cost [3] - The yield curve has steepened, indicating the market is pricing in an unsustainable deficit trajectory [4] - The market is pricing in some base level of tariffs, potentially 10% on the world and 30% on China or transshipment [7] Economic Outlook & Fed Policy - The underlying economy is slowing but remains above recession levels, leading to expectations of a soft landing [4][5] - Inflation has come in weaker in recent months, leading the market to price in Fed rate cuts, approximately 100 to 120 basis points [5][6] - The market anticipates "good news rate cuts" from the Fed due to the slowing economy and potential for one-time price shocks from tariffs [6] - A risk scenario involves sectoral tariffs causing mini humps or bumps in inflation, which the Fed is closely monitoring [9][10] Fixed Income Investment Strategy - In a soft landing scenario with growth around 1% to 15% and inflation slightly higher, a 4% to 45% tenure seems fair [12] - High-quality fixed income offers attractive yields around 6% to 65%, while high-quality high yield provides around 7% [12] - Fixed income looks attractive due to the potential for diversification and the likelihood of the Fed cutting rates further if the economy slows down [13]

Interest Rate Policy - Treasury Secretary questioned Fed policymakers' judgment on interest rates [1] - Secretary believes two-year Treasury yields signal benchmark rate is too high [1]

Market Trends & Interest Rates - Treasury yields are rising as investors react to weaker jobs data and the potential impact of President Trump's tax and spending package [1] - Interest rates may have peaked in terms of low rates, particularly given the holiday-shortened week [2] - The 10-year Treasury yield continues to move higher [3] Labor Market Analysis - ADP small business job loss data at 8:15 AM EST made some traders nervous, causing yields to drop initially [2] - A potentially weakening labor market could influence the Federal Reserve's decisions [4] - Uncertainty remains whether the day's report is indicative of the larger jobs number to be released tomorrow [5] Federal Reserve (The Fed) & Monetary Policy - A weakening labor market could hasten the Fed's easing campaign [4] - Fed fund futures gravitated towards the upside, indicating expectations of more easing [4] - The market is unsure if today's report is a one-off or a clue about tomorrow's jobs number, impacting expectations for the Fed [5] Bond Market Dynamics - The 2-year yield reflects the most information regarding the Fed [3] - The 210 spread (difference between 2-year and 10-year Treasury yields) bounced back and steepened [3] - The D's contract (likely referring to a specific futures contract) initially reflected the two-year yield's movement but almost returned to unchanged [5]

We of course are watching Iran and Israel developments there. A Fed meeting coming in a couple of days at least the decision and the G7 ongoing as you saw earlier that bilateral between President Trump and uh Canada's Carney. All our eyes on on on everything today.Joe Terteranova, Carrie Firestone, Jim Leventhal with me at the desk. So Joe, we have Iran signaling according to the Wall Street Journal that they want to negotiate. the president all but corroborating that in the um little spray they had with re ...

Summary of Key Points from the Document on Stablecoins and Safe Asset Prices Industry Overview - The document focuses on the impact of dollar-backed stablecoins on short-term US Treasury yields, highlighting their growing significance in financial markets as of March 2025, with combined assets exceeding $200 billion [9][10][22]. Core Findings 1. **Impact on Treasury Yields**: A 2-standard deviation inflow into stablecoins lowers 3-month Treasury yields by approximately 2-2.5 basis points within 10 days, with no significant spillover effects on longer tenors [6][19]. 2. **Asymmetric Effects**: Stablecoin outflows have a more pronounced effect on yields, raising them by 6-8 basis points compared to the 2-3 basis points decrease from inflows [20][63]. 3. **Issuer Contributions**: USDT (Tether) accounts for about 70% of the yield impact from stablecoin flows, while USDC (Circle) contributes around 19% [20][64]. Financial Market Dynamics - Stablecoins have purchased nearly $40 billion of US Treasury bills in 2024, positioning them as significant players in short-term debt markets, comparable to major money market funds [9][10]. - The growth of stablecoins may affect the pass-through of monetary policy to Treasury yields and contribute to safe asset scarcity for non-bank financial institutions [20][21]. Methodology Insights - The analysis utilizes daily data from January 2021 to March 2025, employing local projection regressions to estimate the effects of stablecoin flows on Treasury yields while addressing endogeneity concerns [11][42]. - An instrumental variable strategy is used to isolate the impact of stablecoin flows from other market influences, specifically using cumulative crypto shocks as an instrument [18][55]. Implications for Policy and Regulation - The findings suggest that the rapid growth of the stablecoin sector could influence monetary policy transmission and highlight the need for transparent reserve disclosures to monitor concentrated stablecoin reserve portfolios effectively [20][21]. - Potential financial stability risks arise from stablecoins becoming large investors in Treasury markets, exposing the market to fire sales during periods of stress [21][22]. Additional Observations - The stablecoin market is highly concentrated, with USDT and USDC representing over 95% of the total market capitalization [29]. - The document emphasizes the importance of understanding the interaction between stablecoins and traditional safe asset markets, which has been underexplored in prior research [9][10]. This summary encapsulates the critical insights and findings from the document regarding the role of stablecoins in influencing Treasury yields and their broader implications for financial markets and policy.