The Art of the Deal

The real negotiations begin now. The U.S. has showcased its might and strategic brinkmanship, deploying shock-and-awe tactics through hyperbolic tariff figures. Yet just as markets braced for impact, the U.S. administration offered tariff exemptions and extended an olive branch to Beijing, inviting; China back to the negotiating table.

Why the sudden pivot?

Bond markets began flashing warning signals. The 10Y UST yield surged to 4.6%, while the 30Y UST pierced 5%, unsettling risk sentiment. If Trump intends to engineer a stock market rebound during his term, long-term yields have to go down, not up.

The bond market selloff has ratcheted up pressure on the Fed to intervene. And it seems we’re approaching the inflection point. Last week, the Fed signalled readiness to act in order to stabilise financial conditions. Governor Waller added weight to that shift, indicating that the Fed’s attention is turning toward recession risk, implicitly downplaying persistent inflation, which they now describe as transitory.

Famous last words. The Fed has previously applied the transitory label to a variety of inflationary cycles that proved anything but. Still, the Fed put is inching closer, with markets now expecting 3.5 cuts in 2025.

Meanwhile, gold continues to rally amid growing geopolitical tension. With U.S. Treasuries and the dollar losing some of their traditional safe-haven appeal, gold has now emerged as the market’s preferred store of value.

Elsewhere, rising U.S. swap spreads and widening credit default swaps on sovereign U.S. debt are beginning to reflect a more tangible sense of credit concern.

But where’s Bitcoin in all this?

Unlike gold, BTC has not caught a safe-haven bid. The alternative store of value narrative isn’t gaining traction in the current macro regime. Positioning remains defensive. Participants are still focused on hedging their downside until greater clarity emerges.