Market Insights Recap — Week of June 30, 2025

Hi, I'm Tim Gereg, Head of Capital Solutions at Texas Capital.

Last week was very eventful with economic data, a slew of Fed speak, potential shifts in the regulatory landscape and big moves in U.S. Treasuries. Let's dive in. 

Last week, Fed Chair Powell delivered his semiannual congressional testimony on monetary policy. As expected, his themes were closely aligned with the June FOMC meeting from the week prior. At one point, however, Powell mentioned that we should expect to see inflationary impacts from tariffs show up in the June or July data. As July data is typically released in August, that sets the table for potentially the next rate cut in their September meeting. More on that later.

Also last week the Fed released proposed changes to ease the supplementary leverage ratio, or SLR, capital requirement for large banks. The SLR is a non risk-based capital requirement that determines how much Tier 1 capital banks must hold relative to the total exposures, including U.S. treasuries. Analysts estimate that the changes could free up as much as five and a half to 6 trillion, yes, that's trillion with a T, dollars in balance sheet capacity across the G-SIBs.

After the FOMC meeting on 6 18, two Fed speakers, Christopher Waller and Michelle Bowman, made headlines by saying that they could see cuts as early as July. Governor Waller's dovish comments were actually not real surprising. Back in November of 2023, just before Powell's infamous dovish pivot in December Waller had stated that he could see the first Fed cut in three, four or five months if inflation data softens. Clearly, that was way ahead of schedule, so this made sense: Waller has actually been one of the most dovish Fed members for the past couple of years.

Bowman's comments, however, were actually a bit more surprising as she's generally one of the more hawkish committee members. Bowman was also the only dissenter in the September FOMC meeting opting not to cut, the first Fed governor to dissent in 30 years.

So it's definitely interesting that she's made such a dovish pivot nine months later. And a fun fact: It's worth noting that both Bowman and Waller are the only two Fed governors who were appointed by President Trump.  

Also note, every other committee member last week, including Powell himself, held fast to the wait and see approach and stressed that more clarity is needed before any changes are made to policy.  

In terms of economic data last week, first quarter GDP was revised down 30 bps to -0.5%, and both measures of PCE, core and headline, came in 2/10 of a percent higher than last month. Headline at 2.3% and core at 2.7%. This is Jobs Week, and thanks to the July 4th holiday, we only have to wait until Thursday to get that unemployment report. Analysts are looking for a slight increase to 4.3%, with a non-zero chance that we could see that tick up to 4.4% very soon. We'll also get ISM, JOLTS, ADP and payrolls data over the course of three days, so expect a very volatile week as the market looks for any clues as to the future of rate cuts.

Finally on the rates market, the yield on the 10-year Treasury has been in a notable decline since mid-May and 10 bps lower last week, currently sitting right around 4.25%. The two-year Treasury has been stuck within a tight 20 basis point range since early May and just broke below that range last week, currently, about 3.75%. We've seen this range-bound trading quite a bit this cycle, particularly in the front end of the yield curve as the market is constantly looking for direction on the Fed's next move.

The futures market is now pricing in over five full cuts between now and the end of 2026. It's important to remember, however, that this does not mean that this is what economists are predicting; this is just what we can infer from current fixed rates. 

So there is a lot to take in this week, as always. So, please let us know how we can help.