However, it does look as though this deal has legs although Iran appears to be the winner as sanctions are dropped and assets unfrozen. Crude prices fell back, but not to pre war levels which is unlikely for the moment. Israel continued attacks on Lebanon in an attempt to scupper the deal leading to a fruity outburst from Trump.  

Federal Reserve Direction and Market Implications 

Chairman Warsh’s first FOMC meeting was perceived to be more hawkish than expected as he emphasized the inflation fighting credibility of the Fed. He views current monetary policy as restrictive on housing but not inflation. He emphasized his ambition to reform the Fed and initially this consists of setting up several ‘task forces’ reviewing balance sheet policy and doing away with forward guidance. The dot plot looks to be doomed and without any kind of indication from the Central Bank we can look forward to markets misreading future moves and the potential for more volatility. The percentage of T-Bills as a share of gross Treasury issuance now stands at 85%, a two decade high. This means that Fed policy has an amplified effect on funding costs as they control the front end of the curve. A hike by the Fed is priced in for the second half of 2026 helped by a blowout payrolls gain.  

Global Central Bank Landscape 

The ECB hiked as expected as inflation topped 3% driven by energy price spikes. President Lagarde said that while this ‘inflation shock’ warranted a hike, second round effects have not yet materialised, so the ECB remains in active wait and see mode. Maybe it will be one and done for the moment if inflation expectations remain anchored. The BoJ also hiked to 1%, a 31 year high.  

UK Economic and Political Backdrop 

UK inflation was lower than expectations at 2.8% in May, enabling the Bank to stay on hold although money markets still discount one hike this year. Political risk has reasserted itself with PM Starmer setting out a September timetable for his departure after Burnham’s sweeping bi election victory caused his Cabinet support to evaporate. Despite his recent protestations, we have a potential future PM who does not respect ‘bond markets’ and Gilts have seen some volatility which may continue. National debt will soon pass £3tn.  

Credit Markets and Corporate Issuance Trends 

Credit spreads remain steady despite these headlines and the primary market pumps out new issuance. The hyperscalers continue to access any currency that will have them and Amazon established a C$14bn curve in a 5 tranche deal in maple bonds. Free cashflow and share buybacks have turned into debt issuance and equity issuance, the race continues. Nvidia, provider of chips to the hyperscalers, and previously the least indebted of the Mag7 issued $25bn in a 4 times subscribed 7 tranche …to fund share buybacks. 

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