For all of the news that seems to be highly likely to cause volatility for rates, the market reaction ended up playing out on a very small scale. The biggest day of movement was Monday, with rates opening moderately lower versus the previous week after the big AI-driven stock sell-off pushed some investors into the bond market (when traders buy more bonds, rates move lower, all other things being equal).
The second half of the week featured a Fed announcement and multiple headlines surrounding big, new tariffs on Mexico, Canada, and China. To be fair, the bond market definitely reacted to those headlines, and some mortgage lenders ended up being forced to raise rates a bit on Friday afternoon. But in the bigger picture, the volatility is a non-event so far.
It will take months, if not years to fully analyze the impact from whatever tariffs are ultimately implemented. 2019, which saw rates move lower despite a trade war with China, may or may not prove to be a relevant precedent. Either way, it’s a reminder that tariffs don’t necessarily have one obvious implication for rates, even if the market reacts that way at first. Either way, this round of tariffs is still up in the air in terms of particulars. Based on potential legal challenges and likely exemptions, markets won’t jump too far to conclusions until details are known and the data is showing the impacts.
