Core Viewpoint - The article discusses the ongoing power struggle between the White House and the Federal Reserve, particularly focusing on President Trump's dissatisfaction with current Fed Chair Jerome Powell and the potential candidates for his successor, which could significantly impact interest rate expectations and U.S. Treasury yields [1][4]. Group 1: Federal Reserve Leadership - President Trump is reportedly considering announcing Powell's successor by September or October, with potential candidates including Kevin Warsh, Scott Bessent, and Christopher Waller [1][3]. - Warsh is seen as a candidate with a hawkish stance, advocating for monetary policy independence and prioritizing balance sheet reduction [5]. - Bessent is viewed as a dovish candidate, favoring close coordination between monetary and fiscal policy, which could lead to a more accommodative interest rate path [5]. - Waller, a recent appointee by Trump, has expressed a desire for immediate rate cuts, indicating a more aggressive approach to monetary policy [5]. Group 2: Interest Rate Expectations - The market currently assigns a 76% probability to a Fed rate cut in September, contributing to a decline in the U.S. dollar index to its lowest level since March 2022 [3]. - Analysts expect the Fed may cut rates 1 to 2 times this year, depending on inflation and employment data, with a terminal rate projected around 3% [8]. - The current federal funds rate is in the range of 4.25% to 4.5%, indicating a potential for further easing [8]. Group 3: U.S. Treasury Yields - Short to medium-term U.S. Treasury yields are expected to decline, with a preference for 5-year bonds due to favorable risk-reward ratios [6][8]. - The outlook for 30-year bonds is less optimistic, as high U.S. debt levels may keep long-term yields elevated [8]. - The Treasury is anticipated to issue more short to medium-term bonds to meet market demand, reflecting a shift in investor interest [8]. Group 4: China and Currency Dynamics - The Chinese bond market is expected to remain stable, with 5-year and 10-year government bond yields reported at 1.475% and 1.65%, respectively [10]. - The future of the China-U.S. interest rate differential will largely depend on developments in the U.S. [10]. - Analysts predict a gradual appreciation of the Chinese yuan against the U.S. dollar, with Goldman Sachs adjusting its forecasts for the yuan's exchange rate to 7.1, 7, and 6.9 over the next 3, 6, and 12 months, respectively [11].

Core Viewpoint - The potential appointment of a new Federal Reserve chair by President Trump is expected to significantly influence interest rate cut expectations and U.S. Treasury yields [1][2]. Group 1: Federal Reserve Chair Candidates - President Trump is considering three main candidates for the Federal Reserve chair: Kevin Warsh, Scott Bessent, and Christopher Waller [1][2]. - Warsh is seen as a hawkish candidate who advocates for monetary policy independence and prioritizes balance sheet reduction [2][3]. - Bessent is recognized for his coordination skills during chaotic tariff policies and has a dovish stance, favoring close alignment between monetary and fiscal policies [3]. - Waller, a recent appointee by Trump, has expressed a desire for immediate rate cuts and emphasizes data-driven decision-making [3]. Group 2: Interest Rate Expectations - The market currently implies a 76% probability of a Federal Reserve rate cut in September, contributing to a decline in the U.S. dollar index [2]. - Analysts expect the Federal Reserve may cut rates 1 to 2 times this year, depending on inflation and employment data [4][5]. - The terminal rate is anticipated to be around 3%, with the current federal funds rate between 4.25% and 4.5% [5]. Group 3: U.S. Treasury Yields - Short to medium-term U.S. Treasury yields are expected to decline, with a preference for 5 to 10-year maturities over 30-year bonds [1][4][5]. - The market is currently experiencing a sell-off in Treasuries, but analysts remain optimistic about future yield declines [5]. - The demand for 30-year bonds may decrease due to high U.S. debt levels, leading to more issuance of shorter-term bonds by the Treasury [5]. Group 4: China-U.S. Interest Rate Differential - The future changes in the China-U.S. interest rate differential are likely to depend more on developments in the U.S. [6]. - Chinese government bond yields are expected to remain stable, with the People's Bank of China maintaining a flexible approach to monetary policy [6]. - Analysts suggest that the Chinese yuan may continue to appreciate against the U.S. dollar, supported by strong export performance and an undervalued exchange rate [7].