Good morning, investors. US stock futures surged overnight as traders brace for a potential update from the White House on a potential US-China trade deal later today. But at least for now, the bond market isn’t yet convinced.

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The bond market has looked much less optimistic than the stock market. 

Equities have snapped back since their Liberation Day sell-off, with traders positioning for trade deals and tariff de-escalation. Investors’ risk appetite has returned in dramatic fashion across stocks and crypto. 

Bond traders, however, need more convincing. 

Treasury markets are still demanding a premium for uncertainty. Long-term bond yields remain above pre-tariff levels, and term premiums are holding near their highs for the year.

Together they reflect persistent skepticism in the US economic outlook and policymaker’s ability to manage it.

Bond yields move inversely to bond prices. 

Elevated long-term yields pose a problem for the Federal Reserve, which last week opted against cutting interest rates. Even if the Fed eases this summer, strategists across Wall Street question whether cuts will actually reach consumers and businesses.

Mortgage rates and corporate debt are closely tied to long-term yields, which lately have not responded to Fed messaging the way they used to.  

Sunday’s announcement from Geneva adds an intriguing twist. While details remain vague, Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer said the US and China struck a deal.

Beijing also deemed the talks productive. 

More news is expected to roll out Monday. It’s possible that the bond market could loosen up if the two nations announce changes to the punishing tariffs — 145% on Chinese goods and 125% on US exports — that have paralyzed billions of dollars in two-way trade. 

But vague optimism won’t cut it.

Unless those headline figures come down, the reaction in the bond market will likely be muted. 

After April’s abrupt policy shocks, not to mention a US deficit that continues to balloon, investors remain jittery. And Treasury markets, rather than pricing in a soft landing or smooth politics, are behaving as if uncertainty will stick. 

As much as stocks tend to rally into headlines, the bond market is not one to reward photo ops. 

Market snapshot

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Elsewhere

🚢 Ten percent baseline tariffs staying for “foreseeable future.” That’s according to Commerce Secretary Howard Lutnick. He rejected the idea of consumers taking on higher prices, and maintained that businesses and countries will pay. (CNBC)

📊 Fresh inflation data comes due this week. The latest CPI release hits Tuesday, and PPI arrives Wednesday. Retail sales data will shed light on the health of the US consumer later in the week — all against the backdrop of ongoing trade talks. (Yahoo Finance)

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📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day, unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else. Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at phil@openingbellmedia.com.