Mortgage rates surge over 7% as tariffs hit bond market

SDVCuck says that's not true and rates should be lower and you can't read a balance sheet and mortgage rates will be high 4's in a matter of time etc

Might be a dumb question, but if bond yield were higher in January and February than now, why wasn’t it getting much attention?

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if bond yield were higher in January and February than now, why wasn’t it getting much attention?

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Probably because of the recent volatility of the 10 year bond rate. Just one week ago today the rate dipped below 4%.

At today's 4.4% it means the rate has gone up 10% in 5 trading days.

That kind of rate volatility isn't typical.

Can someone explain how tarriffs hurt bonds and send yields up?

Maybe firms are selling off assets to hold cash because they don’t know what’s going to happen next. I’m not sure tariffs would directly impact bond prices the way they impact stocks (where you can obviously connect rising prices -> reduced profits -> lower valuation). But rising uncertainty from the manner the tariffs were implemented might make people risk averse.

It’s a little complex.

Warren buffet answered some of this in an interview in 1998.

LINK /

Essentially, the trade deficit that Trump hates so much is what suppresses our bond rates.

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BUFFET: Let’s just assume the Japanese, or any other country, decides to sell some U.S. government holdings that they have. If they sell them to U.S. corporations or citizens or anything, what do they receive in exchange? They receive U.S. dollars. What do they do with the U.S. dollars? You know, I mean they can’t get out of the system.

If they sell them to the French, you know, the French give them something in return. Now the French own the government securities.

But really as long as we, the United States, run a deficit — a big deficit — a trade deficit — we are accepting goods and giving something in exchange to foreigners. I mean when they send us whatever it may be — and on balance they send us more of that then we send over there — we give them something in exchange.

We give them — we may give them an IOU. We may give them a government bond. But we may give them an investment they make in the United States.

But they have to be net investors in this country as long as we’re net consumers of their goods. It’s a tautology.

So I don’t even know quite how a foreign government dumps its government bonds without getting some other type of asset in exchange that may have an effect on a different market.

The one question you always want to ask in economics is — and not a bad idea elsewhere, too — but is, “And then what?” Because there’s always a second side to a transaction.

And just ask yourself, if you are a Japanese bank and you sell a billion dollars’ worth of government bonds — U.S. government bonds — what do you receive in exchange, and what do you do with it? And if you follow that through, I don’t think you’ll be worried about foreign governments selling U.S. bonds. It is not a threat.

Charlie?

CHARLIE MUNGER: If I owned Japan, I would want a large holding of U.S. Treasurys. You’re on an island nation without much in the way of natural resources. I think their policy is quite intelligent for Japan, and I’d be very surprised if they dumped all their Treasurys.

WARREN BUFFETT: If they’re a net exporter to us, though, what choice do they have? When you think about it.

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We print money and use it to pay the trade deficit. Countries are happy to take our bullshite fake money because of our stability.


So, if you:


1. Remove the trade deficit
2. Remove the stability


Suddenly, people want our bonds less, and will dump them. “Eliminating the trade deficit” is tangent to removing reserve currency status of the U.S. dollar.

Yet another reason to not go into debt. They really get you by the balls.

…so, getting out of the market (selling assets) because they don’t know what’s going on or going to happen (uncertainty)?

You also clipped the one time I (admittedly lazily) said “people,” while the rest of my post was clearly directed at firms. Hedge funds in particular are large drivers in demand shifts. Joe Main Street might be frozen in fear watching the carnage (and thus not selling bonds), but Bradley managing accounts at the hedge fund probably isn’t.

All I feel comfortable saying for sure is bond yield up = bond demand down = people selling off bonds. Like I said earlier, I doubt it’s directly due to tariffs (that’s just not how bonds work…), but high uncertainty can lead to selloffs, and “uncertainty” is probably the word of the month for the markets lol.

I have some other guesses, but they’re more politicized and I don’t feel like throwing them out there without real evidence.

China holds $671 billion in USA treasury bonds. That is something like 10% of all foreign held bonds.

It feels like we are trying to pick a financial war with someone who holds a huge part of our debt.
What could go wrong?

It’s not going to matter how much he cuts the rates if everyone dumps bonds.