| Bloomberg Evening Briefing Americas |
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| A $2 trillion market for securities linked to US inflation data could be the first area of Treasuries that would crack if the US Bureau of Labor Statistics is politicized, according to bond investors. Since President Donald Trump fired BLS chief Erika McEntarfer on Friday following a jobs report that showed unemployment rising on his watch, investors have fretted that the unprecedented move could erode trust in government data. Even before Trump's outburst, questions were being raised about how long America's "gold standard" system for economic data could withstand his effort to centralize power by collapsing firewalls meant to protect independent agencies. The result of that happening to the BLS could be catastrophic when it comes to asset prices. Indeed, the very fact of McEntarfer's dismissal, and the scrutiny that awaits her replacement and the agency's subsequent actions, may have already done irreparable damage. That link is perhaps most acute in Treasury inflation-protected securities, where the face value of a bond is adjusted based on the consumer price index, which is calculated by the BLS. Interest payments are based on that floating principal. And US price growth is very much in the spotlight, with a July CPI report due next week and economists expecting both annual headline and core readings to remain above the Fed's 2% target. While Trump has persistently called for the Federal Reserve to cut interest rates, there are signs his tariffs are reigniting inflation. "The integrity of this data is at least as important as the employment data," said Michael Feroli, chief US economist at JPMorgan. "Here, even seemingly innocuous technical changes can matter." —Jordan Parker Erb | |
What You Need to Know Today | |
| There's a lot of economic data that comes from outside the federal government, too—but the news isn't good there, either. The US services sector effectively stagnated in July as firms faced with tepid demand and rising costs reduced headcount. The Institute for Supply Management's index of services declined last month to 50.1, below all estimates in a Bloomberg survey of economists. Readings above 50 indicate expansion: the employment index dropped to 46.4, contracting for the fourth time in five months and marking one of the lowest readings since the pandemic. The data paint a picture of a sluggish service economy wrestling with the fallout from Trump's tariffs and cautious consumers. Stocks on Tuesday wiped out gains on all this bad news. Also, a soft $58 billion sale of three-year notes kicked off a trio of US auctions this week. The yield on 10-year Treasuries was little changed at 4.20%, while those on two-year notes rose four basis points to 3.72%. Here's your markets wrap. | |
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| Treasury Secretary Scott Bessent doesn't want to be nominated to replace current Fed Chair Jerome Powell, according to Trump. Though Powell is scheduled to step down in May, Trump has placed intense pressure on the Fed in his demand for lower rates, including calling for Powell to resign and at times mulling whether he should fire him, which may not be legally in his power to do. Trump, 79, said he was considering four candidates—including former Federal Reserve Governor Kevin Warsh and National Economic Council Director Kevin Hassett—for the post, but cautioned he didn't intend to make the decision soon. | |
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| The dollar is primed to fall a lot further, and the appointment of a new Fed chair who's willing to follow Trump's lead and cut rates quickly could be the catalyst, according to Bill Campbell, portfolio manager at DoubleLine Capital. After one of its worst starts to a year on record, the dollar posted its first monthly gain of 2025 in July. But Campbell is sticking with his view that the greenback has entered a multi-year decline as investors balk at vast US deficits, now set to expand by more than $3.4 trillion under the recent Republican tax cut and spending bill, and diversify into other regions. The Bloomberg Dollar Spot Index fell 0.1% Tuesday after the aforementioned disappointing report from the service sector. | |
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| More bad news we're afraid. Two of Powell's predecessors warned of potential threats to the $29 trillion Treasuries market, ranging from an unsustainable fiscal path (US national debt on track to exceed $40 trillion) to concerns about the political system in Washington.  Tim Geithner, left, and Hank Paulson in 2018. Photographer: Zach Gibson/Bloomberg Hank Paulson said "our current trajectory is unsustainable" with regard to federal borrowing. But Timothy Geithner said 10-year Treasury yields are trading at "pretty modest levels at the moment, reflecting some level of ultimate confidence the US will run the country in a sensible way." Both agreed that tariffs will hurt US industry. | |
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| Amid a global furor over starvation in Gaza and the tens of thousands killed in the territory by Israel's military since Hamas's deadly 2023 attack, Benjamin Netanyahu is nevertheless said to be weighing expanding Israel's military presence in the strip to include 25% of the territory not already under its control. A further military advance would come despite intensifying opposition to Israel's approach to the war both abroad and at home, where Israelis are concerned with the fate of the remaining hostages. Several international governments spoke out against the spiraling humanitarian toll of the war on Gaza's 2 million-plus population, with the United Nations warning of worsening starvation due to Israeli restrictions on food supplies and the devastation wrought by the conflict. | |
 Israeli soldiers and tanks positioned near the border with Gaza on Aug. 5. Photographer: Jack Guez/Getty Images | |
What You'll Need to Know Tomorro'w' | |
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