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Bond yields fall after tariff news. Are mortgage rates next?

Liberation Day has finally arrived, and what a wild day it’s been! The bond market and stock futures rose when the initial discussions about the 10% tariffs hit the market. But the real game changer? Those anticipated reciprocal tariffs sent the 10-year yield plummeting from 4.23% to 4.11%, currently trading at 4.13%.

Since we believe in the close relationship between the 10-year yield and mortgage rates, we expect mortgage rates to decrease tomorrow if bond yields continue to decline. Here’s what the bond yields looked like on Wednesday afternoon:

My bottom range forecast for the 10-year yield in 2025 is 3.80%. At 4.11%, it marks the lowest intraday yield we’ve seen all year. Let’s give credit where it’s due — the White House aimed for a lower 10-year yield, and guess what? They nailed it! Buckle up, because this could be just the beginning.

We still have the BLS jobs report this Friday, along with a few comments from Fed presidents. Over the next two days, we will observe how the market reacts to this news and anything that happens over the weekend. We have been struggling to close below 4.15% in 2025. However, as mentioned in the Housing Market Tracker article over the weekend, if there were ever a week to see bond yields and mortgage rates go lower, it would be this week.

Housing data!

What does this mean for housing? Well, lower mortgage rates in 2025 have created the first positive spring run in demand in purchase apps in years. Today’s data showed:

+2% week to week
+9% year over year

All this is happening with mortgage rates that haven’t dropped below 6.64%, which was when this data line used to improve in previous years.

2025 YTD weekly purchase application data:

6 Positive
3 Negative
3 Flat
We have a lot of YoY growth in the data, and it’s rising.

In 2024, this was what the data line was doing when mortgage rates went from 6.63% to 7.50%:

14 negative prints
2 flat
2 Positive
Zero year-over-year growth

As you can see in the data below, purchase applications have been positive, and rates haven’t even broken under 6.64% yet.

Over the next couple of days, I will closely monitor the markets and observe how the bond and stock sectors respond. We’ll dive deep into the potential implications for the housing market in the coming year. With a lower 10-year yield and mortgage rates, we’ve already seen positive impacts on housing as we head into 2025.

Regarding tariffs, the concept of reciprocal tariffs could set a precedent for other nations to lower their rates in exchange for reductions on our end. However, we may also witness an uptick in tariffs from other countries in response.

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