The Two Records That Bookended a Wild JulyThe Yield That Would Not Fall The 30-year Treasury closed Friday at 5.25%, a level the security has not touched since July 2007. That is 19 years, past the 2008 financial crisis, past a decade of near-zero rates, past two Fed hiking cycles. The 10-year topped 4.7% for the first time since January 2025. The data this week should have pulled yields down. Q2 GDP printed 1.5% against a 1.8 to 2.3% consensus. Core PCE cooled to 3.3% year over year with a 0.1% monthly print. Weekly jobless claims 197,000, in line. Cool growth, cool inflation. Two consecutive days of the long end selling off anyway. That is not a rate-expectations story. September Fed hike odds actually fell across the week, from roughly 80% pre-meeting to near 63% by Friday. So the front end priced Warsh as committed to holding. The long end kept selling regardless. That is term premium. The Tariff Schedule Confirms It The country-specific rates went live this morning. Canada 35% on non-USMCA compliant goods. Switzerland 39%. Cambodia and Thailand 36%. Bangladesh and Serbia 35%. Indonesia 32%. Bosnia 30%. Japan, Korea, Malaysia, Kazakhstan, Tunisia 25%. Philippines 20%. Myanmar and Laos 40%. Those rates layer on top of the Section 301 base tariff at 10 to 12.5% that took effect Jul 24 and already covers 60 trading partners representing 99% of US imports. Combined, the average US effective tariff rate is at its highest level in nearly a century. The country has not run tariff exposure like this since 1933. Yale’s Budget Lab has been tracking the run. Our view: the 30-year spent all week pricing structurally higher prices ahead. This morning is the mechanism. The bond market called it before the policy hit the calendar. The Rotation Held Through Friday The equity market spent Friday finishing the AI capex verdict it started Wednesday. Amazon added 15.63% on AWS at 28% and a $20 billion custom-chip run rate. Alphabet added 7.12%, folding into the cloud-winners column with Microsoft and Amazon. Microsoft added another 3% on top of Thursday’s record close. Meta added 3.3%. Apple dropped 7.13%, blaming chip supply constraints as AI infrastructure buyers vacuum up components. Same rule as Wednesday. Cloud-scale AI revenue paid. Consumer or margin-drain punished. Four Mag 7 verdicts across two nights, and Friday tacked on a fifth reading with Alphabet. Two names remain outside the vote: Nvidia reports late August, and Tesla was priced weeks ago. What the Flat July Numbers Hid The month closed with the S&P 500 essentially flat, down 0.1%. Nasdaq off 3.2%. Dow up 0.3%, a fourth straight monthly gain. Those flat monthly numbers hide the actual week. The biggest single-day stock gain ever recorded printed the same session the 30-year hit a 19-year high. Four of the Mag 7 got repriced in a two-night window. The Fed held with three dissents, the loudest since September 2016. The dollar weakened 3.3% against the yen and prompted suspected BOJ intervention. In this tape, the S&P at 7,489 tells you almost nothing. The dispersion under it tells you everything. Worth Watching Next Week Monday opens with a live tariff schedule for the first time. Watch whether the 30-year holds 5.25% into a full trading session, or whether short covering brings any relief. Watch whether the dollar catches a bid on higher import costs, or whether the term-premium story keeps the greenback pressured. On the calendar next week: ISM Manufacturing Monday, JOLTS Tuesday, ADP Wednesday, jobless claims Thursday, non-farm payrolls Friday. Nvidia reports late August. And the September Fed meeting sits five weeks out, with hike odds now near 63% and a long end that already told you what it thinks about the answer. |