The better-than-expected US jobs data jerked 10y yields some 9bp higher, and it put an end to any hopes that the Federal Reserve could cut rates in July. That probability was seen as high as 25%, but has now dropped significantly to near zero.

The One Big Beautiful Bill Act managed to pass through Congress and will now go to President Trump to sign. This bill includes a continuation of tax cuts that will further increase the already large fiscal deficits. The expected rise in issuance should put upward pressure on the curve from the back end and can further widen the spread between UST and the SOFR curves. Right now, the fiscal picture benefits from low unemployment and reasonable growth. But we think markets are at risk of being too complacent about the signing of this bill, since the fiscal trajectory remains worrying in any case.