Portland Mortgage Market Update — April 11, 2025

Most importantly, I hope you are having a great week! Here is my attempt to provide an update for this week, which I am sure will be obsolete as soon as I hit send ??

Wow, where do I even begin? In a week that has felt like a month, there was a lot to unpack but I will try to keep this at a higher level for ease of understanding. With liberation day last week, Trump announced sweeping tariffs against all US trading partners across the globe. Over the weekend, multiple trading partners issued reciprocal tariffs against the US. This upended the market (and by "market" I mean every market-stocks, bonds, equities, you name it) with some of the worst performing days since the pandemic on Monday and Tuesday. Then, overnight Tuesday, bond yields spiked to over 5.0. Trump then issued a "pause" on the implementation of the stiffer tariffs for everyone except China on Wednesday, and the markets rallied as a result (the pause left everyone else at a flat 10% tariff- China is still set at a 145% tariff rate and today they bumped their tariffs against the US t o125%, effectively killing all trade between US-China).

Why did a bond yield spike cause Trump to pivot on his tariff talk? It should be noted that no one has officially come out and said this is the case, in fact Treasury Secretary Bessent on Wednesday said the pause was all part of Trump's master plan. However, the logic tracks. President Trump is focused on reducing the deficit and government bloat. That being said, government debt just hit the 2nd highest level over a 6 month period, and about a third of it is set to come due in August. That means they will have to either pay it off (unlikely) or refinance at the current rate which would likely lead to a catastrophic debt spiral. So Trump wants rates lower, and they can't get lower unless yields go down. Hence, the pause was issued to keep yields in check. The bigger problem now is the world at large either doesn't like the course of action being taken, and/or doesn't trust the US leadership to accomplish its goals in restructuring world trade. So the value of the US dollar is tanking as investors focus on other, more stable and safe opportunities away from the increasingly volatile US, which is still driving yields and rates up despite Trump's efforts.

Oh yeah, it was also Inflation Week! The CPI and PPI were released this week and showed a pretty good drop in inflation. Unfortunately, this data is pretty much irrelevant in light of the ongoing trade/tariff drama as investors and companies are trying to figure out how to navigate this new landscape. CEOs are starting to warn about a potential recession, with Black Rock CEO Larry Fink hinting that we may already be in one. The market is now betting with almost 95% certainty that rates will have to be cut at least 50 basis points by the end of the year, and over 50% they will go 75 basis points lower.