• It’s been relatively quiet around US President Trump the past fortnight. Too quiet now it seems… Two weeks ago, the POTUS was too busy collecting money in the Middle East. This week, he needed to align House Republicans to pass his big beautiful, deficit-augmenting, bill. They narrowly did so yesterday, giving way to the Senate to deliberate on the bill. Overall, the bill remains on track to make the president’s self-imposed Independence Day deadline. With those issues out of the way, Trump went back to one of his favorite pastimes: ranting on social media. It started rather innocent with an attack at the very untalented Bruce Springsteen, morphed into a treat of 25% tariffs on Apple if iPhones aren’t made in the US (Apple is pivoting production from China to India) and ended with the recommendation of a straight 50% tariff on the EU, effective June 1st as talks with the bloc are “going nowhere”. So far for the 90-day truce in the trade war. The Truth Social post covered an otherwise calm trading session with risk aversion. European stock markets fell off a cliff, currently registering losses of over 2%. US equity futures also dived up to 2% lower. Core bonds rallied with German Bunds outperforming. Yields currently cede 9 bps to 7.5 bps in a bull steepening move. More ECB rate cuts beyond the June meeting are all of a sudden back into play. US Treasuries build on yesterday’s sell-the-rumour, buy-the-fact gains (House vote) with yields losing 6 bps (2-yr) to 1.5 bps (30-yr) in a similar steepening move. The euro suffered only a marginal setback against the dollar whose losing more and more international appeal. EUR/USD dipped from 1.0375 to 1.0325. EUR/GBP trades below 0.84 for the first time since early April on EUR weakness after UK markets ignored strong April UK retail sales. Safe haven currencies JPY (USD/JPY 142.50) and CHF (EUR/CHF 0.93) excel. US Treasury Secretary Bessent hopes that Trump’s threat “lights a fire under the EU”. He called EU negotiations an exception to the rule as talks with many Asian nations move quickly in the right direction. Last time around Trump had a tariff recommendation (80% for China to unlock trade talks), Bessent managed to eventually agree on a 30% tariff. Going into the long US (and UK) weekend, we can only hope for the best and expect the worse. The stakes at the G7 meeting of finance ministers and central bankers in Canada are high. Bank of Japan governor Ueda at the sidelines of that meeting was asked late last night on this week’s sell-off in long-term Japanese government bonds. They pushed Japanese 20-yr (>2.5%), 30-yr (>3.2%) and 40-yr (3.7%) yields to their highest levels since 1999. Ueda declined to comment specifically on short-term developments, “but of course we will continue to monitor the market carefully”. These comments echo the Japanese MoF’s first verbal firing shots in the run-up to FX interventions in case of an uncontrolled weakening of the Japanese currency. Markets took notice with Japanese government bonds leading the way higher this morning. In a corrective move, the local yield curve bull flattened with the Japanese 30-yr yield ending 12.7 bps lower.
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