Fixed Income & Equities Markets Week in Review

The bond market’s attention this week centered on inflation data and congressional testimony from Fed Chair Kevin Warsh.

Despite ongoing and still tentative negotiations between the United States and Iran, as well as continued strikes that pushed oil prices back above $80 per barrel for the first time since mid-June, bond traders found reasons for optimism in this week’s inflation reports. On Tuesday, data showed that headline consumer prices fell 0.4% in June, better than the 0.1% decline economists had expected and the first monthly drop since May 2020. On a year-over-year basis, CPI rose 3.5% in June, also below the expected 3.8% increase. Core CPI, which excludes food and energy prices, was flat for the month and brought the year-over-year pace down to 2.6%, its slowest rate since March.

Wednesday’s producer price data told a similar story. Producer prices declined 0.3% in June, compared with expectations for no change, while the year-over-year increase came in at 5.5%, below expectations of 6.2%. Although inflation remains elevated, the relative improvement in June strengthened the view that price pressures are cooling and could ease further into year-end as the impact of tariffs fades and energy prices potentially normalize.

Fed Chair Kevin Warsh was in Washington, D.C., this week to deliver his semiannual update to lawmakers. His testimony was consistent with the message he has emphasized since becoming Chair. He reiterated his commitment to addressing inflation, reaffirmed the Fed’s independence, and described this week’s inflation data as encouraging while cautioning that it was too soon to declare “mission accomplished.” Warsh also received praise from senators in both parties for his staffing of the Fed’s five task forces and again underscored his commitment to achieving the Fed’s dual mandate.

The combination of better-than-expected inflation data and Warsh’s steady messaging helped push market-based rate hike expectations further out. Last week, markets were pricing in a potential hike in September, but as of this writing, expectations have shifted toward December. Oil prices will remain an important driver of Fed policy expectations given their potential to reignite inflation. Prices have risen over the past week following the collapse of the ceasefire between the United States and Iran, while Thursday’s strikes marked the fifth straight day of attacks and traffic through the Strait of Hormuz continued to slow.

As of July 17, 2026