Implied volatility across rates, FX and stocks are now reflecting little to no stresses and are essentially back at pre-liberation day levels. This morning’s headline that China-US have reached a framework for implementing the Geneva agreement may be viewed as a positive but we suspect that considerable optimism may already be in the price given the grind higher in the S&P 500 over the past few days. Worries about the US economy rolling over has also proven unfounded thus far. Similarly, market participants are giving the benefit of doubt that inflation would largely be contained (we get fresh CPI readings tonight) despite the tariffs announced. At these vol levels, some complacency may be starting to creep in. In level terms, 10Y yields and the S&P 500 are both clearly higher than where they were on 1 April (pre-Liberation Day).
Despite the apparent lull, we note that there are several upcoming events that could trigger fresh bouts of volatility. First, trade deals have been limited thus far (only the UK has gotten a deal) and we suspect that the market will get anxious if nothing gets announced closer to the 8 July deadline. Further negotiations progress with China would be critical as this could offers signals on what the US is willing to accept / concede. Second, it is not clear if the One Big Beautiful Bill Act will pass the Senate. Divisions along party lines and within the Republicans mean that passage could prove difficult. The self-imposed deadline of 4 July would be a point to watch. For now, 10Y yields are trading close to 4.5%, reflecting economic optimism and some worries on the fiscal front. 
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