From the Desk of AgFi’s Business Strategist
Published 5/12/25 – Over the weekend, it was announced that the US and China had come to a preliminary trade agreement and that tariffs would be reduced by both for a 90-day period. The equity market took this as a positive leading to a significant move up in all the major indexes. However, the bond market reacted negatively sending interest rates higher.
Equity players judged the news to be good in that it would reduce uncertainty, restore more normal trade, and likely result in better corporate earnings. Bond traders see all those factors and think that it could increase loan demand and perhaps give the Federal Reserve one less impediment to lowering short-term interest rates, further enhancing economic growth and loan demand.
For borrowers, interest rates have moved up materially in recent days with the 10-year Treasury rate up nearly 30 b.p. (.3%) since the end of April. That has taken the 10-year Treasury rate to near the high of the past 3 months (see the chart below). Now, it will be important to see if the rate jumps to a new high, implying even higher rates to come or if it falls back within the range. News, and interpretation of that news, will make a difference.
