| Interest Rate Market Snapshot | ||||||
| Federal Funds | SOFR | 2Y Treasury | 5Y Treasury | 7Y Treasury | 10Y Treasury | |
| 4.33% | 4.37% | 3.74% | 3.76% | 3.89% | 4.05% | |
Liberation Day was yesterday, Libation Day is today
-
The era of free trade is over
-
Trump unveiled new tariffs on almost all US trade partners yesterday, with a 10% minimum duty going into effect Saturday, and additional reciprocal tariffs on 60 individual countries going into effect next Wednesday
-
The hardest hit from reciprocal tariffs: Vietnam (46%), Thailand (36%) and China (34%)
-
The new tariff on China is in addition to the other ones already in place, taking the total import tax rate for all Chinese made products to 67%
-
According to the Office of the US Trade Representative, Chinese imports accounted for 16.5% of all US goods in 2024 and they get 67% more expensive next week
-
-
All-in, the new tariffs take the total effective US tariff rate from 7% to 23%, a 16% jump
-
In 2018, the Fed studied the impact tariffs had during Trump 1.0, and found that a 16% increase like this would likely translate into a 2.3% reduction to GDP and a 2% increase to inflation
-
I suspect the impact to be more severe, with even lower growth and higher inflation
-
The Atlanta Fed Nowcast on GDP adds to my anxiety, showing Q1 2025 GDP at -3.7% this morning
-
-
The S&P 500 opened over 200 points lower, and if it closes near these levels, it would mark the largest single-day point decline for the index since 2020
-
Rates are finding a bid thanks to the flight to safe-haven asset classes
-
The 10-Year is down to 4.03% (a 11 bp drop and for a brief moment dipped under 4% this morning)
-
The 2-Year is down to 3.72% (a 14 bp drop)
-
And swap rates reflect a SOFR forward market that has a 75% chance of 4 rate cuts over the next 6 Fed meetings. At a minimum, 3 rate cuts are fully priced in through year end
-
-
If Powell’s job was tough before, it just became impossible. Post-COVID inflation showed how difficult supply-driven inflation is to control—and it’s coming back around. This time, it’s likely to be accompanied by higher unemployment. In the months ahead, the Fed may have two fires to fight—but only one fire hose to work with
Source: bloomberg
Which fire is more important to battle: higher inflation or higher unemployment
-
That’s the question Powell will need to answer sooner rather than later. Tomorrow, he gives a speech at the SABEW conference so perhaps we get a glimpse of that prioritization then
-
I like how Richmond President, Thomas Barkin, recently characterized this dilemma. He noted that a price shock from tariffs could lead to a cage match between frustrated consumers, who don't want to pay more, and businesses, who believe they have no choice but to pass on the higher costs
-
“If you are a company that can’t raise prices, then your margin goes down and you’re going to start working on operational efficiencies, and that means headcount”
-
But, like others, he still sees the Fed sitting on their hands for the time being, delaying any response until the “fog” clears
-
-
-
If Powell holds onto the “wait and see” message about the Fed’s response to all of this, the front-loaded rate cuts priced into swaps could back off some
-
Recall, the last Dot Plot showed 100 bps of cuts coming by the end of next year
-
Today, the market has that priced into the next 8 months
-
-
To be fair, 100 basis points of rate cuts can happen—we saw it late last year when the Fed took us from 5.50% Fed Funds to 4.50% in just four months. But that move was in response to a weakening job market and easing inflation. Today, the inflation outlook is quite the opposite, and any response to labor market weakness is likely to be more measured and stretched over a longer period of time
source: bloomberg
source: bloomberg
On the inflation front:
-
Survey data this week is adding to the worries in the rate market
-
The results of the ISM survey showed that input prices paid in both manufacturing and services are rising again
-
Not just by a small amount either. Manufacturing prices paid jumped to the highest level since 2020
-
source: bloomberg
-
But…we know all too well that CPI is heavily weighted to the services sector of the economy, and so far…it’s still giving us some hope
source: bloomberg
-
And with the oil now trading under $70, inflation swaps and inflation nowcast models point to nearby relief may be on the way in the upcoming data – though we’ll see
source: bloomberg
On the Job front:
-
In the rearview mirror, it’s a “low hire, low fire” job market. Tomorrow’s job report is likely to reiterate that
-
Out in front of us, DOGE layoffs loom large
-
The first hint of it showed up in the Challenger Job Cut report this morning, where it jumped 205% from this time last year
-
The Challenger report provides a look at job cut announcements, and the DOGE efforts amounted to more than 280,000 planned layoffs of federal workers across 27 agencies over the past two months
-
It spilled over to the private sector too, where 4,400 cuts were announced at employers who rely on federal contracts
-
-
But those are just announcements, and time will tell whether or not it translates into a higher number of unemployment people or they find jobs elsewhere
-
For now, jobless claims remain very low and is encouraging for the Fed that intends to “wait and see”…
sourcE: bloomberg
This material should be construed as the solicitation of an account, order, and/or services and represents the opinions and viewpoints of the individual authors or presenters. It does not constitute an individualized recommendation or take into account the particular trading objectives, financial situations, or needs of individual customers.
The views are current only through the date stated and are subject to change at any time based upon market or other conditions, and StoneX Group Inc. (“SGI”) disclaims any responsibility to update such views. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. Past performance does not guarantee future results.
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided.
References to certain OTC products or swaps are made on behalf of StoneX Markets, LLC (SXM), a member of the National Futures Association (NFA) and provisionally registered with the U.S. Commodity Futures Trading Commission (CFTC) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ and who have been accepted as customers of SXM.
StoneX Financial Inc. (SFI) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (SEC) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Advisor. References to certain securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to certain exchange-traded futures and options are made on behalf of the FCM Division of SFI. Wealth Management is offered through SA Stone Wealth Management Inc., member FINRA/SIPC, and SA Stone Investment Advisors Inc., an SEC-registered investment advisor, both wholly owned subsidiaries of SGI.
StoneX Financial Ltd (SFL) is registered in England and Wales, company no. 5616586. SFL is authorised and regulated by the Financial Conduct Authority (FCA) (registration number FRN:446717) to provide services to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorised to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorised and regulated by the FCA under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorised by the FCA.
StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism. SAP is an “Approved International Trading Company” authorized to act as a “Spot Commodity Broker” under the Commodity Trading Act.
StoneX Financial Pte Ltd (Co. Reg. No 201130598R) (“SFP”) is regulated by the Monetary Authority of Singapore and is a Capital Markets Service Licensee (for dealing in capital market products), an Exempt Financial Adviser (for advising on investment products and issuing or promulgating analyses/ reports on investment products) and a Major Payment Institution (for cross-border money transfer service).
SFP may distribute analysis/report produced by its respective foreign affiliates within the StoneX Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations Recipients should contact SFP at (65) 6309 1000 for any matters arising from, or in connection with, this webinar.
StoneX Financial (HK) Limited (CE)No.: BCQ152) (“SHK”) is regulated by the Hong Kong Securities and Futures Commission for Dealing in Securities and Dealing in Futures Contracts.
StoneX Financial Pty Ltd (“SFA”)(ACN: 141 774 727) holds an Australian Financial Service License and is regulated by the Australian Securities and Investments Commission (AFSL: 345646).
StoneX Securities Co., Ltd. (“SSJ”)(Co. Reg. No 010401047199) is regulated by the Japanese Financial Services Agency as a Type-I Financial Instruments Business Operator (Kanto Local Finance Bureau (FIBO)No.291’), is a member of the Financial Futures Association of Japan for dealing and broking FX and FX Option transactions, and is a member of the Japan Securities Dealers Association for dealing and broking stock indices and option transactions.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
The report/analysis herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
© 2025 StoneX Group Inc. All Rights Reserved.
Discover more insights
