Fixed Income & Equities Markets Week in Review

Fixed Income Update

US Treasury yields rose on Friday but remained on track for a third consecutive weekly decline, with benchmark yields hovering near their lowest levels since early May.

The decline this week was sparked by comments from Fed Governors Chris Waller and Michelle Bowman, suggesting that a rate cut at the Fed’s upcoming July 30th meeting is a real possibility. Bowman, notably, indicated she would support easing as soon as next month if inflation “remains near its current level.” Her comments carried greater surprise than Waller’s, given her historically hawkish stance. Bowman was the lone dissent when the Fed cut rates by 50 bps last September and has consistently emphasized inflation risks over labor market concerns in recent years.

Balancing out the dovish tone from Waller and Bowman, Fed Chair Jay Powell delivered his semiannual testimony to Congress on Tuesday and Wednesday. Powell largely reiterated the stance from last week’s press conference: rate cuts are more likely than not at some point this year, tariff impacts remain uncertain but are expected to be temporary, and current policy is well-positioned for now.

There was no shortage of Fedspeak this week, with 25 separate appearances by Fed officials highlighting clear divisions within the committee. This aligns with last week’s Summary of Economic Projections, which showed roughly half of the nineteen FOMC members anticipate at least 50 bps in cuts this year, while seven project no cuts. When asked specifically about Waller and Bowman’s remarks, Powell declined to comment on other officials’ forecasts.

In a separate but related development, The Wall Street Journal’s Nick Timiraos reported that President Trump may announce his pick for Fed Chair later this summer. Powell’s term as Chair ends on May 15, 2026, while his term as Governor extends to January 31, 2028. By naming a replacement for the Chairmanship well ahead of term expiry, Trump could increase pressure on Powell to continue lowering rates. Reportedly, the shortlist has been narrowed to “three or four” candidates, including former Fed Governor Kevin Warsh, National Economic Council Director Kevin Hassett, Treasury Secretary Scott Bessent (considered the market favorite), and current Fed Governor Chris Waller.

As the second quarter concludes, it is remarkable to consider the round-trip markets have taken in just three months. Five-year Treasury yields traded in a nearly 50 basis point range during the quarter, driven by volatility from tariffs, trade disputes, treasury supply, and political developments. Despite this, the Bloomberg Treasury Index is poised to show Q2 returns of approximately 1.5%, with year-to-date returns nearing 3.7%.

Looking ahead, the third quarter begins next week and could kick off with fireworks as the June nonfarm payrolls report is released on Thursday, July 3rd. Markets also await further updates on the “One, Big, Beautiful Bill” and a renewed focus on the debt ceiling.

For the week, Treasury yields were lower by 7 to 19 basis points.

As of June 27, 2025