Market Update: Rates Trending Higher Amid Tariff Updates

Blog posted On April 11, 2025

A LOT has happened between the end of last week and the end of this week. While last week ended with rates trending at the lowest levels in six months, this week is a completely different story. Starting Monday, rates took a sharp trend higher. Right now, they’re hovering around the highest levels since February. So what happened to make them move?

Tariffs were sending rates lower. Now, the reverse is true.

The main contributor to last week’s rate drop was the tariff announcement. “Rates fell sharply due to the market's ongoing reaction to Wednesday's tariff announcement and especially due to China's announcement of retaliatory tariffs overnight,” wrote Matthew Graham of Mortgage News Daily. “The prospect of trade wars between the US and numerous foreign countries has generally caused weakness in the stock market and strength in the bond market (stronger bonds = lower rates).”

Then, the bond market began showing weakness too, sending rates higher. The reasoning is anything but straightforward. The main cause is still tariffs. But the reasoning is different. An oversimplified version is this: at first, the markets were more focused on the implications of a recession from tariffs. Then, the focus shifted to this: If trade slows down and the government is relying on tariffs for revenue, it will need to issue more Treasuries to make up for the shortfall. This increased Treasury issuance typically puts upward pressure on interest rates, assuming other factors remain the same. Plus, if trade relationships are damaged, it implies lower foreign demand for Treasuries and thus, higher rates.

But what about low inflation numbers?

Yesterday, we got the news that the consumer price index from March showed inflation levels were lower than expected. Typically, this news would send rates trending lower. But it was overshadowed by the tariff news. Some economists think that we are already in a recession, while others think it will happen sometime this year. Most agree that the Fed should start cutting rates again. We will see how this all plays out in coming weeks and months. Stay tuned and please reach out if you have any questions in the meantime! We will work hard to keep you updated as important news breaks (keep an eye out for our ‘breaking news’ posts on social media).

Sources: Bloomberg, Mortgage News Daily