As Congress grinds through the budget reconciliation, fixed income market experts are eyeballing an uncontrolled national debt while dreading a heavy-handed response from the Treasury bond market.

A "lighter-than-anticipated CPI report" led to UST firmness, as it "quelled fears about tariff-related inflation and boosted enthusiasm that the Fed will cut rates in the next two or three meetings," said José Torres, senior economist at Interactive Brokers.

The U.S. economy added 139,000 jobs, a healthy clip that counters the president's calls for a rate cut to bolster the labor market.

As private credit tops $1 trillion, Fed researchers warn bank exposure to the sector could spark systemic risk if defaults spike.

The Federal Open Market Committee will meet on June 17-18. While no rate cuts are expected at this point, things can change quickly. Join us live on June 20th at 1 p.m., as Lauren Saidel-Baker, economist at ITR Economics, provides her take on the meeting the new Summary of Economic Projections and Fed Chair Jerome Powell's press conference.

Federal Reserve Gov. Michael Barr said tariffs could have an outsize impact on small businesses and hardships could outlive the trade policy debate.

The Federal Reserve chair said there is "room for improvement" in how the central bank conveys economic uncertainties to markets and the public.

Even with Monday's U.S.-China tariff truce and Tuesday's inflation print, the market has felt better over the past several weeks, said Jamie Iselin, managing director and head of municipal fixed income at Neuberger Berman.

The recent firmness in the market has been "much appreciated," said Shannon Rinehart, senior portfolio manager of municipal debt at Columbia Threadneedle Investments.

"The threat of having both inflation and unemployment rising simultaneously continues to create a big headache for the Fed's interest policy," said Wells Fargo Investment Institute global fixed income strategist Luis Alvarado.