Core Viewpoint - The recent sell-off of long-term U.S. Treasuries indicates that if Trump's tariff policy is rejected, fiscal issues will become the primary concern for investors due to fears of rising debt levels exacerbating budget deficits [1] Group 1: Market Reactions - The long end of the U.S. Treasury yield curve has shown the most volatility, reflecting concerns about fiscal conditions that are as significant as worries regarding the Federal Reserve's interest rate path [1] - Market reactions on Wednesday were more subdued compared to the initial introduction of tariffs earlier this year, as investors anticipate the government may introduce alternative tariffs [1] Group 2: Fiscal Implications - The loss of tariff revenue will reignite concerns over budget deficits, limiting the scale of fiscal stimulus and making it unlikely to fully offset revenue losses [1] - Although the direct impact of tariffs on inflation is limited, a recent slight decrease in inflation swap rates suggests that investors believe the cancellation of tariff policies could still have a dampening effect on inflation [1]

Group 1: US Economic Outlook - UBS suggests that if the US Supreme Court rules Trump's tariff policy illegal, it could force the government to refund approximately $140 billion in taxes, which is 7.9% of the projected federal budget deficit for FY2025. This could lead to a structural low-tariff trade environment, enhancing household purchasing power and easing inflationary pressures, thus providing the Federal Reserve with more room for rate cuts [1] - Barclays indicates that if repo rates remain above the effective federal funds rate target range for several weeks, the Federal Reserve may need to intervene by increasing reserves through more repo lending or direct purchases of Treasury securities [2] - Jefferies maintains a low allocation stance on US Treasuries, highlighting that the Supreme Court's decision on tariffs could significantly impact market volatility and the yield curve [2] Group 2: UK Economic Outlook - Danske Bank anticipates a 25 basis point rate cut by the Bank of England, with a close vote of 5-4. The cooling labor market is noted, but not at a concerning pace. Key votes from the Governor and Deputy Governor will be crucial [3] - Analysts from London Capital Group expect the Bank of England to keep the base rate at 4.0% pending details from the upcoming budget announcement, as uncertainty in new policy measures is suppressing economic activity [4] - Berenberg economists predict that potential tax increases in the UK budget could pave the way for further rate cuts next year, with at least two cuts of 25 basis points to 3.50% anticipated if fiscal tightening is implemented [4] Group 3: Eurozone Economic Data - Eurozone retail sales for September fell short of expectations, primarily due to a 0.2% decline in non-food sales, while food sales remained stable. This lagging data is not expected to influence the European Central Bank's policy outlook [5]

2年期与10年期美债收益率曲线达到7月中旬以来最陡水平。对利率敏感度更高的短端收益率下滑，反映市场对美联储独立性担忧以及仍在升温的降息预期。外汇交易员 (@myfxtrader):特朗普签署文件解除美联储理事库克的职务，即时生效。 https://t.co/Yl5kfBd6XA ...

Group 1 - The U.S. Treasury Secretary, Becerra, mentioned that there are 10 to 11 candidates being considered for the successor to the Federal Reserve Chairman Powell, whose term ends in May next year [1] - The list includes three previously unannounced candidates: David Zervos, Larry Lindsey, and Rick Rieder, alongside eight confirmed candidates including Vice Chair Bowman and Governor Waller [1] - The selection process involves Becerra meeting all candidates to narrow down the list before presenting it to President Trump, indicating that the decision is not imminent and may take considerable time [1] Group 2 - Becerra stated that the Federal Reserve's interest rates should be 150-175 basis points lower than current levels, suggesting a potential for a 50 basis point cut starting in September [2] - Analysts believe the likelihood of a 50 basis point cut in September is nearly zero, requiring a weak non-farm payroll report for such a move [2] - Becerra also indicated that the Federal Reserve does not need to reimplement large-scale asset purchases (QE) and is supplementing fiscal cash through short-term Treasury bill issuance [2]

Core Viewpoint - The article discusses the increasing pressure from President Trump on Federal Reserve Chairman Jerome Powell, particularly through the nomination of a "shadow chairman" and scrutiny of the Fed's renovation project, raising concerns about the independence of the Federal Reserve [1][2][4]. Group 1: Political Pressure on the Federal Reserve - President Trump has intensified his criticism of Powell and is exploring ways to exert more control over the Federal Reserve, including the potential removal of the "60-vote rule" in the Senate [1][3][4]. - Trump's visit to the Federal Reserve and focus on the renovation project may signal a push for more regulatory oversight and reform of the Fed's operations [2][4]. - The administration's narrative suggests that previous interest rate decisions by the Fed were politically motivated, aiming to assist Democratic candidates [2][4]. Group 2: Potential Reforms and Implications - If Trump successfully abolishes the "60-vote rule," it could allow for significant changes in how the Federal Reserve operates, including altering the composition of its board and potentially undermining its independence [3][4]. - Historical precedents show that presidential interference in Fed policy has occurred before, but Trump's approach is unprecedented in its intensity and frequency [6][7]. Group 3: Market Reactions and Investor Strategies - Investors are advised to prepare for potential interest rate cuts, with expectations of a maximum of 50 basis points before Powell's departure, followed by more significant cuts starting in June [9]. - The divergence in monetary policy between the Federal Reserve and the European Central Bank presents trading opportunities, particularly as a more dovish Fed could lead to a decline in the dollar's value [9]. - The uncertainty surrounding the new Fed chair's stance could lead to volatility in U.S. equity markets, depending on whether the new chair maintains the Fed's independence or succumbs to political pressures [9].

Group 1 - The market reacted negatively to reports that President Trump was considering replacing Federal Reserve Chairman Jerome Powell, with declines in U.S. stocks, the dollar, and long-term Treasury bonds, while short-term bonds rose due to increased rate cut expectations [1] - After Trump's statement denying any plans to replace Powell, the market showed signs of recovery, but the initial reaction indicated significant uncertainty and concern among investors [1] - Key data reflected market panic, with the two-year Treasury yield dropping by 8 basis points and the ten-year yield falling by 5 basis points, while the Bloomberg dollar spot index shifted from a 0.2% gain to a 0.7% loss [1] Group 2 - Analysts believe that replacing Powell would not be a "magic bullet" for economic issues, highlighting the importance of the successor's influence on the Federal Reserve's decision-making [4] - Predictions suggest that if Powell were to be replaced, the trade-weighted dollar could drop by 3%-4% within 24 hours, and the fixed income market could see a sell-off of 30-40 basis points [4] - Concerns were raised about the precedent set by threatening to dismiss the Federal Reserve Chairman, indicating a dangerous signal of breaking norms to achieve objectives [4] Group 3 - Trump's ongoing criticism of the Federal Reserve's interest rate policies and recent comments about the rising costs of renovations at the Fed's headquarters suggest potential justifications for his desire to remove Powell [4] - Market confidence could decline, leading to more rate cut expectations, a weaker dollar, and increased term premiums if Powell's replacement were to occur [4] - Experienced traders familiar with "Trump market dynamics" view the situation as a typical day in the market, indicating a level of desensitization to such political maneuvers [4][5]

Group 1 - The article discusses concerns regarding President Trump's calls for Federal Reserve Chairman Jerome Powell to resign, which is prompting investors to prepare for rising inflation risks [1][2] - Investors are pricing in potential future inflation pressures, as indicated by the rise in the 5-year Treasury Inflation-Protected Securities (TIPS) breakeven inflation rate to 2.476%, the highest in three months [1] - The White House is investigating potential cost overruns on the Federal Reserve's historic headquarters renovation, raising fears that Trump may seek to remove Powell under the guise of "for cause" dismissal [1] Group 2 - Concerns are growing that Trump's criticism of Powell could undermine the independence of the Federal Reserve, leading to increased volatility in financial asset prices [2] - Analysts warn that if the market perceives the Fed's independence is compromised, it could result in a sell-off of U.S. Treasuries, causing long-term bond yields to rise relative to short-term yields [2] - The Fed's recent meeting minutes indicate that most policymakers remain cautious about inflation risks stemming from Trump's tariffs, with little support for a rate cut in the upcoming meeting [2] Group 3 - Trump has stated that Powell's resignation "would be a good thing," despite the fact that the president cannot dismiss the Fed chair solely for policy disagreements [3] - In the current scenario, short-term yields may decrease due to faster rate cuts by the Fed, but long-term yields are likely to rise due to persistent inflation expectations and declining institutional trust [3]

Core Viewpoint - The 20-year U.S. Treasury yield closed below the 30-year yield for the first time in nearly four years, indicating a normalization of the long end of the yield curve [1] Group 1: Yield Curve Dynamics - The long-term Treasury yields have been rising due to market expectations that the Federal Reserve will begin to cut interest rates [1] - The increase in yields is also attributed to bets that expanding fiscal deficits will lead to an increase in Treasury supply [1] Group 2: Historical Context - On Monday, the 30-year Treasury yield was slightly higher than the 20-year yield, marking the first occurrence since October 2021 [1] - In 2022, the Federal Reserve's rate hike cycle caused yields across all maturities to rise, with the 20-year yield at one point exceeding the 30-year yield by as much as 30 basis points [1]

Core Viewpoint - The recent decline in U.S. Treasury yields across various maturities is closely linked to disappointing housing market data, which has intensified expectations for a potential interest rate cut by the Federal Reserve [1][4]. Group 1: Treasury Yield Movements - All maturities of U.S. Treasury yields experienced a slight decline, with the 2-year yield dropping by 4.02 basis points to 3.7786%, the 5-year yield down by 1.59 basis points to 3.845%, the 10-year yield down by 0.59 basis points to 4.2906%, and the 30-year yield down by 0.31 basis points to 4.8311% [3]. - The difference between the 30-year and 5-year Treasury yields is approaching 100 basis points, the highest level since 2021, while the 10-year and 2-year yield spread has reached 51.2 basis points, indicating significant economic expectations [3]. Group 2: Market Expectations for Rate Cuts - The discussion around potential interest rate cuts has gained momentum following comments from Federal Reserve officials, with predictions suggesting a 25% chance of a rate cut in July and a 90% chance in September [4]. - The recent housing market data, showing a 13.7% month-over-month decline in new home sales to an annualized rate of 623,000 units, has heightened concerns about economic downturn risks, further reinforcing rate cut expectations [4]. Group 3: Future Market Dynamics - Upcoming speeches from several Federal Reserve officials are anticipated to provide new policy insights, while key economic data releases, including the first quarter GDP final value and weekly jobless claims, are expected to influence market direction [5]. - The market remains uncertain, with expectations that short-term yields may continue to decline, while long-term yields may not follow suit, suggesting a potential steepening of the yield curve [5].

Core Insights - Bloomberg is the first global index provider to include Chinese bonds in mainstream global indices, offering a unique perspective on the Chinese bond market [1] - The Bloomberg China Aggregate Index recorded a return of -0.01% in May, with a year-to-date return of 0.41% [3][5] - The Chinese government bonds and policy bank bonds index saw a return of -0.14% in May, with a year-to-date return of 0.28% in local currency [3][5] Index Performance - The China Aggregate Index (I08271CN) had a 1-day return of 0.06%, a month-to-date return of -0.01%, and a year-to-date return of 0.41% [5] - The China Treasury and Policy Banks Index (I32561CN) recorded a 1-day return of 0.10%, a month-to-date return of -0.14%, and a year-to-date return of 0.28% [5] - The China Corporate Index (I08275CN) achieved a year-to-date return of 0.76% [5] Market Trends - The Asian emerging market high-yield dollar bond index spread narrowed by nearly 130 basis points from the April peak of 5.63%, leading to a 1.42% increase in the index for May [9] - The yield curve of U.S. Treasuries is experiencing a "bull steepening," which may increase the hedging costs for RMB southbound investors in the dollar bond market [9] - Despite rising hedging costs in 2025, dollar bonds still offer a yield advantage of 44.5 basis points compared to the domestic market priced in RMB [9]