Bonds & Stocks
Treasury yields climbed and stocks fluctuated on speculation the Federal Reserve will need to raise interest rates again as inflation remains elevated. Traders amped up bets on a June rate increase to about 40% after Fed Bank of Dallas President Lorie Logan said the case for a pause next month is not clear. Central bank Governor Philip Jefferson suggested he is willing to be patient to see how the policy tightening over the past year filters through the economy. The S&P 500 edged lower, following Wednesday’s rebound. Two-year yields topped 4.2%, rising to the highest since April.
Economy
America’s sway over the world economy is being eroded by self-inflicted policy wounds, with a dangerous standoff over the debt ceiling putting renewed scrutiny on the dollar’s preeminent status in global trade and finance. A behind-the-curve Federal Reserve struggling to corral inflation, a string of bank failures and now a political deadlock over the government’s ability to borrow are chipping away at US authority. At the same time, geopolitical fault lines are hardening, with the US assisting Ukraine in its war against Russia and locked in competition with China, two adversaries poised to exploit any misstep by policymakers in Washington—such as a first-ever US debt default.
World
US President Joe Biden and other Group of Seven leaders began arriving in the Japanese city of Hiroshima on Thursday for an annual summit, with concerns around China and Russia — both uninvited — set to dominate discussions. The meeting, which runs through Sunday, comes as Russia launched fresh aerial assaults on Ukraine and Chinese President Xi Jinping attended a separate summit seeking to deepen Beijing’s influence in Central Asia.