Steady Fed Policy
July 31, 2025
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–General disappointment as Powell played down the prospect of an ease in September. Weakest contracts on the SOFR strip were near quarterlies, SFRZ5 fell 8 to 9602 and H6, M6 fell 8.5 to 9624 and 9647. 2/10 treasury spread made a new recent low of 44 bps. Ten year yield rose 4.8 bps to 4.376%. Yesterday’s data was solid with Q2 GDP 3.0% and ADP 104k. Oct FF settled -5 at 9575.5, indicating about a 1/3 chance of a 25 bp cut in Sept.
–During the press conference Powell acknowledged 2 sets of employment and inflation data will be released in front of the Sept meeting which would provide more information. From the FOMC statement, “Uncertainty about the economic outlook remains elevated.”
–One aspect of that uncertainty was on display yesterday in the copper market. HGU5 plunged around 20%, as Trump pared back some tariffs. (RTRS) “US would impose 50% tariff on copper pipes and wiring, but fell short of sweeping restrictions expected and left out copper materials such as ores, concentrates and cathodes.” The COMEX premium over London vanished.
–Jon Hilsenrath, the former Fed whisperer, notes that the TBAC report (Treasury Borrowing Advisory Comm) included the following line, which was not included in previous reports: “The Committee felt strongly that independence of the FOMC remains of paramount importance to a healthy and well-functioning Treasury market with widespread investor demand.” Another official rebuke to Trump’s imperious pronouncements and threats. Treasury auctions next week on Aug 5, 6, 7 are $58b in 3s, $42b 10s and $25b 30s, which will raise new cash of $35.2b.
–Today’s news includes Q2 ECI, PCE Prices, expected 2.5% from 2.3% yoy with Core expected 2.7%. Jobless Claims and Chgo PMI as well. NFP tomorrow expected 110k.
–META and MSFT sparked an instant rally of 75 handles in ESU post-settle. AAPL and AMZN today.
