Insights 
VT 
The U.S. Deputy Treasury Secretary stated that there is no worry over ongoing price rises. It is anticipated that inflation will return to the targeted level.
The foundation for the U.S. economy is forming to potentially accelerate in the second half of the year. There is confidence that the earliest timeline to consider the X date will be in August.
US Inflation Outlook
The remarks from Deputy Secretary Adeyemo offer a relatively calm view on near-term inflation, implying a belief that recent increases in prices are largely contained and are not gaining momentum. This view contrasts somewhat with recent data showing persistent consumer price pressures, especially in housing and energy segments, though notably, core readings have moderated slightly. Reassurance that price movements are not spiralling appears to be rooted in confidence in the Federal Reserve’s trajectory and ongoing strength in labour markets.
His mention of the “X date” — referring to the point at which the U.S. government might cease to meet its obligations without raising the debt ceiling — being pushed to August suggests that Treasury cash balances and tax inflows are tracking better than previously feared. That gives more breathing room, at least from a fiscal disruption standpoint, reducing near-term anxiety in bond and funding markets. The timeline relieves pressure, particularly across short-term bills which have lately shown signs of stress around earlier projected deadlines.
We take from this that rate expectations will remain reactive to upcoming inflation releases, but forward guidance from the Fed and Treasury will carry even more weight. Futures have been whipsawing around CPI and PPI prints, and while rate path uncertainty has shrunk mildly, large moves are still emerging around event risks. That type of volatility isn’t going anywhere in the short run.
Market Volatility and Treasury Updates
With yields pulling back from recent highs and the US dollar drifting lower, risk remains skewed toward additional movement should June data surprise one way or another. In practice, this means volatility premiums are likely staying inflated, especially in STIR and gamma-heavy corners. It’s worth keeping implieds marked aggressively rather than letting theta decay drag too hard — the short gamma trade is not earning its adjust-to-neutral cushion right now in index space.
Yellen’s department continues to show preference for boosting bill issuance at the front-end of the curve, which is encouraging duration out the curve to remain sticky. That’s likely to keep late-week flattening intact unless growth data prints hot enough to trigger another round of repricing in the Fed’s outlook. It’s also meant that SOFR has kept a narrow spread to target upper bound — echoing calm repo market conditions for now.
Our attention will drift next toward treasury auctions and how appetite handles increasing supply. If clearing comes with tail risk or falters any further, pressure may climb again on positioning — especially for those staying long convexity or lean on balance sheets. The pattern we’ve seen lately — a cautious Monday unwind with pickup around midweek — may hold as the rhythm for now.
Eyes next shift toward any Fed commentary on the balance sheet, particularly whether Treasury reinvestments slow enough to change dollar liquidity assumptions. Should that happen, front-end OIS spreads might widen as cash gets drawn up off the sidelines. That flow alone could offset any calm on the rate side, forcing repricing in volatility curves across intermediate rates.
No complacency then — we’ll continue managing skew, keeping optionality focused where event timing overlaps most clearly with market pricing inefficiencies. There’s plenty ahead to keep recalibrating along the way.
