Insights 
VT 
Scott Bessent conveyed optimism about ongoing trade negotiations, suggesting that new trading deals might materialise soon. He pointed out that 17 trading partners, excluding China, have presented commendable proposals.
Bessent discussed the potential for smoother trade resulting from these negotiations and anticipated progress with China in the near future. He noted that current market conditions do not account for inflation, as there is resilient hard data present.
Reduced Tariffs
Bessent mentioned that these developments could ideally lead to reduced tariffs between the US and other countries. He acknowledged, however, that a great deal of trust is necessary to anticipate such a positive outcome at this time.
The initial portion lays out a relatively clear outlook: Bessent is linking recent trade proposals and macroeconomic data to a view that global trade might be poised for fewer obstructions. What stands out is his comment on 17 other nations – this hints at a broad, multilateral shift in trade dynamics. In plain terms, more than a dozen economies appear willing to ease commerce barriers, which, if realised, could sharply affect pricing models and assumptions about trade friction premiums, especially in markets sensitive to tariff structures.
More noteworthy, perhaps, is how Bessent framed the current market pricing environment. He contends inflation is absent from recent valuations – and supports that opinion with reference to solid economic indicators. That is a confidence that risks are being underappreciated by consensus. Notably, he also touched on the prospect of an agreement with China, though couched in guarded language. For us, that implies a degree of patience will be necessary.
Trading Standpoint
From a trading standpoint, we should now be alert to better visibility on long-dated volatilities in export-driven sectors. With trust remaining a hurdle, as Bessent alluded, short-term reaction functions will likely remain cautious. That offers windows of stability, especially in directional trades based on implied rates, but doesn’t suggest repositioning too early on expectations of firm conclusions.
Keep in mind his comment on tariffs – the potential for them to ease is not priced in. That creates opportunity. If these proposals develop into contracts, expectations could shift rapidly. Monitor for front-running behaviour in cross-border-sensitive instruments. We suspect positioning around regional currencies, particularly those with strong current accounts, might begin to reflect these possibilities through increased demand.
Lastly, by noting inflation’s absence in valuations despite robust data, Bessent hints at a divergence that could provoke repricing. That is especially relevant for forward rates and index-linked products. We interpret it as a subtle warning: if the data continues to resist downward revisions, current pricing structures might become misaligned fairly abruptly. Stay light on leverage, but maintain readiness to rotate once firmness begins to show in the larger macro signals.
