Bad news for bonds today as Trump shelved the threat of tariffs on Mexico that helped fuel the sharpest leg of the recent rally 2 weeks ago. Perhaps more significant than this particular tariff news is the fact that Trump is showing markets he’s willing to make progress much sooner than the average conspiracy theory suggests.
What theories are those? They’re actually not too conspiratorial. They include things like forcing the Fed’s hand in rate cuts due to concern over global growth. More popular still is the notion that Trump’s reelection efforts would benefit from the economy decelerating now only to surge into 2020’s election. While those options aren’t exactly precluded by today’s news, they are somewhat easier to question.
Most of the bond market weakness was in place by the opening bell with 10yr yields up near the 2.147% technical level. Fannie 3.0 MBS lost 3/8ths of a point by the end of the day. Tomorrow’s momentum will be important in determining whether markets are reading this as a one-off mini-correction or the start of a longer-lasting bounce.