By: Andrew Carter
With tariffs taking center stage this week, the economy experienced significant volatility. The implementation of tariffs targeting Canada, Mexico, and China spurred what many are calling the “tariff trade.” This development introduced heightened uncertainty for equity investors, leading to a market sell-off as many sought safer, risk-averse alternatives. The sell-off exerted considerable downward pressure on bond yields, causing Treasury rates to drop sharply—nearly 70 basis points from their 2025 calendar year high. However, the 10-Year Treasury has already started to recover, rising approximately 12.5 basis points from its one-week low of 4.10%. Investors who seized the opportunity during this pronounced dip are likely to benefit as Treasury yields stabilize and regain balance.
The long-term effects of these tariffs remain uncertain, but their impact, combined with other influencing factors, has led the futures market to anticipate the possibility of one to two additional rate cuts by the Fed this year. Should these anticipated cuts materialize, they are expected to exert prolonged downward pressure on Treasuries. While the market will require a few more days to fully digest this information, the current expectation is that the 10-Year Treasury will likely stabilize within the 4.25% to low 4% range and maintain this steadiness for the remainder of the year. Additionally, abundant market liquidity has driven credit spreads tighter, contributing to a generally more favorable interest rate environment for real estate investors.
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