Investors are considering the possibility that a second Trump administration could see higher tariffs, tighter immigration restrictions and an extension of the 2017 tax cuts could spur inflation.
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Long-term interest rates rose sharply on Monday as investors who fund most mortgage and government debt weighed the potential economic impact of higher tariffs, tighter immigration restrictions and an expected extension of the 2017 tax cuts under a second Trump administration.
A series of data releases showed inflation slowing in May, while mortgage rates were trending lower from a 2024 high hit in April.
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But President Joe Biden’s low approval ratings in polls following Thursday’s debate with President Donald Trump have increased the chances that Trump will retake the White House.
a CBS News/YouGov Poll The poll released Sunday found that 72% of voters believe Biden does not have the mental and cognitive health necessary to serve as president and 45% of Democrats think he should abandon the campaign.
a Data Poll for Progress While 67% of voters believe Biden is too old to be president, potential Democratic alternatives are expected to perform similarly against Trump.
With the growing likelihood of a Trump victory and the possibility that Republicans will regain control of the Senate, analysts at Barclays, Goldman Sachs and Morgan Stanley have warned clients to hedge against inflation. Bloomberg News report.
Analysts say President Trump’s economic policies could rekindle inflation, pushing up interest rates on long-term Treasury bonds and similar investments such as mortgage-backed securities, which fund most home loans.
For example, higher tariffs and immigration crackdowns could increase inflationary pressures on prices and wages, while President Trump’s promise to make the 2017 tax cuts permanent could spur an increase in the national deficit.
10-year government bond yields surge
sauce: Yahoo Finance.
yield 10-Year Government Bond, barometer Mortgage rates rose 14 basis points on Monday to 4.48%. A basis point is one-hundredth of a percentage point, so the 24 basis point increase in the 10-year Treasury yield since June 25 equates to about 0.25 of a percentage point.
Track your rates data Mortgage News Daily The rate on the 30-year fixed-rate mortgage rose 7 basis points to 7.14% on Monday, marking an 11 basis point increase since June 25, the bank said.
Jack McIntyre, a portfolio manager at Brandywine Global Investment Management, told Bloomberg that “bond vigilantes” appear to be selling Treasury bonds in the aftermath of the debate and the growing likelihood of a Republican victory in November.
The bond market Similar reactions When Trump was elected in 2016, he promised to cut taxes while also increasing spending on infrastructure projects and increasing government borrowing.
While most of the $8.4 trillion in new borrowing approved by Trump during his first term was pandemic-related, he also approved $4.8 trillion in non-COVID-related debt, according to research firm The Financial Report. analysis It was approved by the bipartisan Committee for a Responsible Federal Budget. Biden has approved $2.2 trillion in non-COVID-related debt in his first three years and five months in office.
The Tax Cuts and Jobs Act of 2017, which President Trump has pledged to make permanent, is expected to increase the government debt by $1.9 trillion over 10 years, even if it expires next year.
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