Group 1 - The Federal Reserve may consider interest rate cuts in the second half of 2025 if tariffs remain around 10% [1] - The ongoing trade tensions have created a dilemma for the Federal Reserve, balancing between persistent inflation data and market volatility caused by tariffs [3] - The U.S. market experienced a significant downturn on May 21, with a sharp rise in bond yields, a drop in stock prices, and the dollar index falling below 100 [4] Group 2 - The long-standing debt issues have been exacerbated by the trade tensions, leading to increased scrutiny on the Federal Reserve's role in stabilizing the market [5] - The weak auction of 20-year U.S. Treasury bonds on May 22 resulted in a "triple whammy" effect on stocks, bonds, and currencies, with the S&P 500 index dropping nearly 1.6% [7] - The auction's final yield of 5.047% marked a significant increase from previous rates, indicating a lack of demand and raising concerns about the U.S. fiscal situation [8] Group 3 - The recent surge in U.S. Treasury yields has raised fears among investors regarding the government's fiscal health and monetary policy [8] - The ongoing trade war has revealed underlying issues in the U.S. economy, with tariff revenues not keeping pace with rising national debt [9] - The proposed tax cuts are expected to further pressure the U.S. debt situation, with potential implications for the bond market [10] Group 4 - The anticipated tax legislation is projected to reduce household tax burdens significantly, which could impact the fiscal deficit and bond market reactions [11] - The recent rebound in U.S. stocks has raised questions about the sustainability of this rally amid ongoing geopolitical risks and rising federal spending [12] - Investors are advised to be cautious with dollar assets as the market navigates through the current volatility, with a potential shift towards safe-haven assets like gold and yen [13][14]

Group 1: U.S. Treasury Market Dynamics - U.S. Treasury yields have experienced significant volatility, with the 10-year yield surpassing 4.5% due to concerns over fiscal sustainability and inflation[2] - Since April 30, the 10-year Treasury yield has increased by 37 basis points (bps), with the term premium contributing 28 bps to this rise[2] - The term premium reached a new high of 0.9% by May 22, reflecting disturbances in fiscal, inflation, monetary, and trading factors[2] Group 2: Tax Legislation Impact - The "Beautiful Act" passed by the House of Representatives is expected to increase the deficit rate to approximately 8% by 2026, although its marginal economic contribution is limited[3] - The Act extends existing tax cuts, with about 80% of its provisions aimed at prolonging the Tax Cuts and Jobs Act (TCJA) measures, effective from January 1, 2026[3] - The projected increase in the deficit rate due to the Act is estimated at 1.8 percentage points, with a total deficit increase of around $3.3 trillion over the next decade[3] Group 3: Market Reactions and Asset Performance - The market has witnessed a "triple kill" in stocks, bonds, and currencies, with the Nasdaq down 2.5% and the 10-year Treasury yield rising by 8 bps to 4.51%[5] - The U.S. dollar index fell by 1.8% to 99.12, while gold prices surged by 5.0% to $3,351.0 per ounce amid market volatility[5] - The correlation between the U.S. fiscal deficit and Treasury yields remains stable, with a 1 percentage point increase in the deficit leading to an approximate 78 bps rise in the 10-year Treasury yield[3]