The Treasury curve bull flattened overnight with global equity markets weaker (Nikkei -1.03%, Hang Seng -2.21%, Euro Stoxx -1.08%). The popular reasoning for today’s market tone is trade jitters after the White House confirmed late yesterday that it may increase the tariff percentage on $200 billion of Chinese goods from 10% to 25%, and a top Bloomberg headline this morning highlights China’s readiness to retaliate. S&P 500 futures are down 14 points, and the 10-year Treasury yield is back below 3%. Yesterday’s FOMC meeting was uneventful (as expected). There were no policy actions and no dissenting votes, and only a few minor changes were made to the language in the official statement. The description of recent economic activity was changed to “strong” from “solid” in the prior statement. If there was any more meaningful discussion of balance sheet reduction and other matters, it will show up in the minutes of the meeting (released in three weeks).
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