Good Monday AM from your Hometown Lender,
It is just another manic Monday for you Bangles fan (no need to pluralize).
There is so much going on today.
First, this is a huge employment data week with Jolts, tomorrow, ADP Payrolls on Wednesday, Unemployment Claims and Job Cuts on Thursday, and Friday brings the biggest report of the month, the BLS Employment Report.
You can almost taste the volatility. It is palpable.
Getting to today, with tariffs announced last week on Canada, China, and Mexico, bonds were wavering on what that would mean for inflation. I don’t think that question has been answered yet but the initial move in the markets was in equities and in currency. Bonds have handled it in stride so far, having already started to price in the threat of tariffs months ago. Equities took a big hit as the Dow was down 650 points. The USD strengthened by 1%, if you are going to travel abroad, this would be a good time. The bond market is benefitting from the drop in equities although gains are paring back. The 10yr note yield had gotten as low as 4.47% today but has since popped back to 4.53%. Mortgage bonds are up a bit as well. Rate sheets should be a bit better than Friday. Reprice risk on the day is higher than normal with the amount of news coming out (more below).
The prospect of increased borrowing by a second Trump administration has spooked bond investors in recent months. One major concern: how the government will execute that borrowing. At issue is a strategy pursued by the Treasury Department since late 2023 to lean more on short-term Treasurys to fund the government. Many on Wall Street credit that approach with calming markets buffeted by sticky inflation and a swollen federal budget deficit. Key members of the Trump administration, however, have expressed hostility to the strategy, characterizing it as a risky effort to juice the economy. Those include freshly confirmed Treasury Secretary Scott Bessent and Stephen Miran, the president’s choice to chair his Council of Economic Advisers. Floating the deficit with long-term debt and not short-term could forge a path for mortgage rates to improve.
So on to tariffs:
Trump slapped 25% tariffs on goods from Canada and Mexico and 10% duties on imports from China. He put a 10% levy on Canadian oil. Trump said he imposed the tariffs to push the countries to curb the number of migrants coming into the U.S. and stop the flow of the deadly synthetic opioid fentanyl – though the president has long backed import controls as a purely economic tool. Canada quickly retaliated with 25% tariffs on $155 billion in U.S. goods, including beer, Kentucky bourbon and orange juice. Mexico said it also would respond in kind, and China said it would file a lawsuit with the World Trade Organization.
The trade war could widen:
Trump also threatened tariffs on the European Union and United Kingdom. The tariffs threaten to raise operating costs for a range of U.S. companies that operate in the integrated North American supply chain, and increase prices for consumers if businesses choose to pass on those costs. The potential goods affected touch many parts of everyday life: building, cars, gasoline, furniture, shoes, toys, beer, avocados and french fries, among others. Canadian lumber represents 70% of all soft lumber (think building homes) in the US. Mexican Gypsum represents 71% of all Gypsum used in the US (think drywall).
Just now, Mexican President Claudia Sheinbaum said that U.S. President Trump has agreed to put tariffs on Mexico on hold for a month after a telephone conversation in which both leaders agreed to take joint measures to fight fentanyl trafficking across the U.S. border. Equities are paring back earlier losses and bonds are giving up earlier gains on the news.
And, the CFPB which has for years run without any guardrails or accountability has a new boss.
The president has named Treasury Secretary Scott Bessent to run the Consumer Financial Protection Bureau on an acting basis after firing CFPB Director Rohit Chopra over the weekend. I think the agency that does not report to anyone (created during the Obama administration) should be on DOGE’s short list of government restructuring.
Speaking of DOGE, Elon Musk weighed in with cost cuts. His DOGE team is halting some Treasury payments to federal contractors. He’s also in the process of shutting down USAID after his staff were denied access to its systems. Are we happy about this or a bit put off? I am not sure yet.


Stay safe and make today great!