Bonds & Stocks
Treasury yields edged lower, with the 10-year nearing 4%, as data affirming labor-market weakness and remarks from Federal Reserve Governor Stephen Miran bolstered expectations for an interest-rate cut next month. A slump in oil prices and steeper gains for UK government bonds contributed to the bond rally, while expectations that month-end will drive demand to buy Treasuries discourage short positions. Market-implied expectations for a quarter-point rate cut on Dec. 10 held steady, with around 20 basis points of the move, close to 80%, priced in.
Economy
Treasury Secretary Scott Bessent said the Fed has become too complex in how it manages money markets and that simplifying the US central bank is a key theme in his interviews for the next chair of the Federal Reserve. Bessent mentioned the interplay of the Fed's various instruments, including the ample reserves approach and the Standing Repo Facility, as something he has been looking for in the candidates. Bessent suggested that the Fed needs to simplify its operations and that central bankers may be speaking too often, saying "I think it's time for the Fed just to move back into the background".
World
US President Donald Trump held back-to-back calls with the leaders of China and Japan as tensions over Taiwan threaten to derail his trade truce with Beijing. Trump’s conversation with President Xi Jinping marked their first contact since Japan’s new prime minister suggested her nation’s troops could be drawn into a Taiwan crisis, with Xi saying Taiwan’s return to China was an “integral part of the postwar international order.” Trump also spoke with Japanese Prime Minister Sanae Takaichi, who said he reached out to reaffirm ties with Tokyo and update her on the situation with China, with Trump telling her she was a “very close friend” and that she could call him any time.