logo
Deutsche Bank Sees US 30-Year Yield Jump on Any Powell Exit

Deutsche Bank Sees US 30-Year Yield Jump on Any Powell Exit

Yahoo3 days ago
(Bloomberg) -- The potential ouster of Federal Reserve Chair Jerome Powell by President Donald Trump would drive the 30-year Treasury yield higher by more than half a percentage point, according to Deutsche Bank AG strategists.
Why the Federal Reserve's Building Renovation Costs $2.5 Billion
Salt Lake City Turns Winter Olympic Bid Into Statewide Bond Boom
Milan Corruption Probe Casts Shadow Over Property Boom
How San Jose's Mayor Is Working to Build an AI Capital
The clearest hedge against risks to the Fed's independence — and a scenario in which US government spending consumes monetary policy — are yield curve steepener trades, a team including Matthew Raskin and Steven Zeng wrote in a note to clients. These trades benefit if the gap widens between short-term and long-term yields.
Currently, the gap between the five and 30-year yields is around 100 basis points — the steepest since 2021.
'Powell's dismissal would be meant to produce easier monetary policy and should lift inflation expectations and risk premia,' they wrote. 'The implied moves are big but plausible.'
Attacks on the Fed chair by the president and his allies in the administration, who wish to see the central bank lower interest rates faster than officials are currently projecting, have taken on fresh urgency in recent weeks.
On July 16, when headlines flashed across the wire that Trump was likely to fire Powell — a claim that Trump denied within an hour — US equities, the dollar and long-term US government bonds retreated sharply while short-term Treasuries rallied.
What Bloomberg strategists say...
'If it wasn't for inflationary impact of tariffs, Powell would likely have already been happy to cut rates. But the economy is set to be visibly slowing enough in the next few months such that, no matter who is Chair at that stage, they will be able to please the President, without being seen to appease him.'
— Simon White, Markets Live Strategist. Click here for the full analysis.
Based on the gyrations in Treasuries across the curve seen during that brief time period last week, the 30-year nominal Treasury yield could surge some 56 basis points, the Deutsche Bank strategists wrote — even as the front-end of the Treasury curve rallies on expectations of easier monetary policy in the short-term.
The 30-year Treasury has tumbled in July as investors mull over US inflation, the government spending outlook and the path for Fed interest-rate cuts. Last week's consumer inflation figures sparked a selloff that pushed the 30-year yield above 5% for the first time since June. On Tuesday, it hovered around 4.95%.
'Market participants seem to agree that the risk to Fed independence is rising,' wrote Jan Hatzius, chief economist at Goldman Sachs Group Inc., noting that a forward gauge of inflation has decoupled higher from the two-year risk-free rate following a long period of alignment. 'A further increase could make Fed officials more reluctant to cut,' he said.
(Adds comment by Goldman Sachs in the final paragraph)
Elon Musk's Empire Is Creaking Under the Strain of Elon Musk
A Rebel Army Is Building a Rare-Earth Empire on China's Border
Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot
How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All
What the Tough Job Market for New College Grads Says About the Economy
©2025 Bloomberg L.P.
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Trump administration appeals to Supreme Court to allow $783 million research-funding cuts
Trump administration appeals to Supreme Court to allow $783 million research-funding cuts

Yahoo

time26 minutes ago

  • Yahoo

Trump administration appeals to Supreme Court to allow $783 million research-funding cuts

WASHINGTON (AP) — The Trump administration asked the Supreme Court on Thursday to allow it to cut hundreds of millions of dollars' worth of research funding in its push to roll back federal diversity, equity and inclusion efforts. The Justice Department argued a federal judge in Massachusetts was wrong to block the National Institutes of Health from making $783 million worth of cuts to align with President Donald Trump's priorities. U.S. District Judge William Young found that the abrupt cancellations ignored long-held government rules and standards. Young, an appointee of Republican President Ronald Reagan, also said the cuts amounted to 'racial discrimination and discrimination against America's LGBTQ community.' The ruling came in lawsuits filed by 16 attorneys general, public-health advocacy groups and some affected scientists. His decision addressed only a fraction of the hundreds of NIH research projects that have been cut. The Trump administration's appeal also takes aim at nearly two dozen cases over funding. Solicitor General D. John Sauer pointed to a 5-4 decision on the Supreme Court's emergency docket from April that allowed cuts to teacher training programs to go forward. That decisions shows that district judges shouldn't be hearing those cases at all, but rather sending them to federal claims court, he argued. Lindsay Whitehurst, The Associated Press Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

Trump signs order aimed at removing homeless from streets
Trump signs order aimed at removing homeless from streets

Yahoo

time26 minutes ago

  • Yahoo

Trump signs order aimed at removing homeless from streets

President Donald Trump on Thursday signed an executive order aimed at removing homeless people from streets. The measure, titled by the White House as 'Ending Crime and Disorder on America's Streets,' calls on Attorney General Pam Bondi to seek to overturn legal rulings the Trump administration says make it difficult for cities and states to force homeless people into shelters and substance-abuse centers, USA Today first reported. It will also redirect federal funding for homeless programs, many of which aim to provide housing to those in need, to addiction programs and mental health resources, although it was not immediately clear how much money would be involved. 'By removing vagrant criminals from our streets and redirecting resources toward substance abuse programs, the Trump administration will ensure that Americans feel safe in their own communities and that individuals suffering from addiction or mental health struggles are able to get the help they need,' White House spokeswoman Karoline Leavitt said. The order also seeks to prioritize federal grants to cities and states that 'enforce prohibitions on open illicit drug use, urban camping and loitering, and urban squatting, and track the location of sex offenders.' Official figures say America's homeless population is more than 700,000 and rising. But advocates say the number is actually much higher. New York City is one of a few jurisdictions with a 'right to shelter,' meaning in theory that any homeless person has the right to a spot in a shelter. Trump has made fighting big city crime and disorder a major plank of his second White House term, although most measures show crime is declining. Instead of working with Congress or big city mayors, most of whom are Democrats, he has preferred to enact executive orders, some of which have faced critical scrutiny from courts. The edict is touted as forming part of Trump's commitment to ending homelessness, according to a White House fact sheet. It comes after an executive order in March directed the National Park Service to clear homeless encampments and graffiti on federal lands. The Supreme Court ruled in June that that authorities can fine or arrest homeless people for sleeping in public spaces. The ruling, which was approved by a 6-3 margin along ideological lines, overturned a lower court's ruling that it is cruel and unusual punishment to enforce camping bans when shelter is lacking. ________

‘You just added a third building': Powell fact checks Trump's Fed renovation as awkward hard-hat visit turns tense
‘You just added a third building': Powell fact checks Trump's Fed renovation as awkward hard-hat visit turns tense

Yahoo

time26 minutes ago

  • Yahoo

‘You just added a third building': Powell fact checks Trump's Fed renovation as awkward hard-hat visit turns tense

President Donald Trump's attempt to shame Federal Reserve Board of Governors chair Jerome Powell over the cost of a long-running renovation to the central bank's Washington headquarters went horribly wrong on Thursday when Powell had a ready response for the president's accusations during a tour of the construction site. After viewing parts of the costly renovation, Trump and Powell stopped briefly to speak to reporters who'd traveled to the Federal Reserve headquarters with the president. Trump said the cost of the years-long project was now 'about $3.1 billion' rather than the $2.7 billion previously stated by Powell. 'So we're taking a look, and it looks like it's about 3.1 billion went up a little bit or a lot. So the 2.7 is now 3.1 it just came out,' he said reading from a piece of paper, as Powell looked on and shook his head in the negative before interjecting. The chairman replied: 'I haven't heard that from anybody' and asked if the paper Trump was reading from came from the central bank. At that point, Trump handed him the paper and continued talking while Powell pulled out his reading glasses to look. He then told the president that the higher number he was claiming included a separate project that wasn't part of the renovation at issue. 'You just added in a third building,' he said. When Trump replied that the building in question was currently 'being built,' Powell spoke up once more to disabuse the president of his misunderstanding of what he was reading. He told Trump that he was mistakenly counting long-completed renovations to a building named for William Martin Jr., who served as Fed chair from 1951–1970, as part of the renovation of the Fed's main headquarters. 'No, it's been it was built five years ago. We finished Martin five years ago,' he said. Asked by reporters if he expects more overruns on the lengthy project, Powell said the Fed is 'ready' for any but doesn't expect more. 'We have a little bit of a reserve that we may use, but no,' he said before adding that he expects to project will wrap in 2027 — a year after his term as chairman is set to end. Trump and his allies have said the $2.5 billion renovation of the Fed headquarters and a neighboring building reflects an institution run amok — a belief they had hoped to verify in an afternoon tour of the construction site. The site visit by the president is an attempt to further ratchet up pressure on Powell, whom the Republican president has relentlessly attacked for not cutting borrowing costs. Trump's attacks have put the Fed, a historically independent institution, under a harsh spotlight. Undermining its independence could reduce the Fed's ability to calm financial markets and stabilize the U.S. economy. The president has made no secret of his distaste for Powell, whom he nominated to lead the Federal Reserve in 2017, primarily because of Powell's refusal to lower interest rates, particularly in light of Trump's decision to levy tariffs. Powell has said that the central bank needs time to see what effects tariffswill have on inflation and employment before making a determination on interest rates. This has prompted Trump to call Powell a 'stupid person.' The president can do little to remove Powell. Joe Biden re-nominated Powell for another five-year term in 2021 based on his steady leadership during the 2020 COVID-19 pandemic, and his term would expire in May. Federal statute says the president can only remove Powell 'for cause.' For a time, it appeared as if Trump and his allies had found such a cause in the costly renovation of the Fed's headquarters. But Trump, a former real estate developer, appeared to soften his criticisms of the project after viewing it himself. Appearing in his element while sporting a hard hat, Trump said he would like to see the project finish. 'In many ways it's too bad it started, but it did start, and it's been under construction for a long time. Gonna be it's going to be a real long time, because it looks like it's got a long way to go,' he said. A short time later, he told reporters that he'd had a 'very good tour' and declined to repeat his earlier criticisms of the project. He did, however, give a detailed description of the project's complexity with regard to a basement being dug beneath the Washington, D.C. water table. 'I was given a very nice tour by the head of construction. And, you know, look, if you look over here, they're trying to open up the basement. When you open up a basement, first of all, it's the worst space — always. A basement is the worst space in a building, and it's also the most expensive space to build, and especially here, because you have a water line, you know, you they're going down into the water. So they have to build a reverse, what's called a reverse bathtub. The water has to be kept out. It's very expensive construction,' he said. 'There's always Monday morning quarterbacks. I don't want to be that. I want to help them get it finished. It's been going around for years, and I want to help them get it finished.' He later wrote on Truth Social that it had been a 'great honor' to tour the building. 'It's got a long way to go, would have been much better if it were never started, but it is what it is and, hopefully, it will be finished ASAP,' he said. 'The cost overruns are substantial but, on the positive side, our Country is doing very well and can afford just about anything — Even the cost of this building!' He added that he'd be 'watching' the project and hoped to add his own expertise, citing his eponymous real estate company's renovation of the historic Old Post Office building into the hotel that became a MAGA hotspot during his first term before it was sold in 2021. 'The total Construction cost was a small fraction of the Fed Building's cost, and it is many times the size. With all of that being said, let's just get it finished and, even more importantly, LOWER INTEREST RATES!' he said. Despite the president's past criticism, it appears he has backed down from his implicit threat to fire Powell due to negative reaction from markets. Last week during an Oval Office press opportunity, Trump told reporters it was 'highly unlikely' that he would upend nearly a century of precedent by attempting to sack Powell less than a day after he reportedly polled a group of Republican lawmakers on whether he should sack the central bank boss during a Tuesday night meeting in the Oval Office after the 12 House Republicans blocked a cryptocurrency bill favored by the president. With additional reporting by agencies and Washington Bureau Chief Eric Garcia

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store