Eyeing the bond market

Eyeing the bond market

April 10, 2025 25m

Stocks aren’t the only assets in the financial markets that were beat up this week by President Trump’s tariffs. Bonds suffered too. After 3-year Treasury yields rose in the face of disappointing demand, bond investors are scrutinizing Treasury auctions for signs of further weakness. Also in this episode: Trump's anti-DEI push could hurt minority contractors, Atlanta Fed chief Raphael Bostic counsels caution and a millennial in Texas dreams of becoming a homeowner.


 

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At the risk of oversimplifying, this is not good. From American Public Media, this is Marketplace.
in Los Angeles

I'm Kyle Rizdahl. It is Thursday, 10 April.
Good as always to have you along, everybody. Well, let's see.
There are tariffs to talk about, of course. There is inflation to talk about.
The consumer price index up 2.4% year on year, 2.8% if you take out food and energy, both of them lower than expected. And there is, gesturing wildly here, everything else.
So it seemed to us like a good day to get a central banker on the phone. Thus, we did.
Raphael Bostic is the president of the Federal Reserve Bank of Atlanta. Dr.
Bostic, it's good to talk to you again, sir. Good to talk with you, as always, Guy.
All right, so we'll go with the data point of the day. First of all, Consumer Price Index came out this morning lower than expected.
One data point does not a trend make, but what do you think? Well, it's a positive development for sure. The numbers could have gone in a different direction, and I was worried about that.
But as you know, there's a lot that's gone on since those numbers were produced. And that's really what we're focusing on and trying to figure out what the next set of numbers is going to look like.
Well, so let's talk about that. The through line from Fed speakers, of which you are one today, and there have been many this week, and all y'all have been saying, listen, we need to look through this tariff situation.
We need to figure out long term what they're going to mean. And my question is, how do you look through them when, number one, they're so big, and number two, they seem to happen or go away on a whim? Well, you're asking a very difficult question, and it's a question that I ask my team all.
It's my job. I appreciate that.
So, you know, one of the things that we are trying to do is figure out how everyone else is doing this. We're talking to businesses, we're talking to consumers to figure out how they're dealing with this unprecedented level of uncertainty and volatility.
You know, as things are changing on a day to day basis, folks don't really know what they should be planning on or what they should be planning for. And so the question that we've been asking is, well, what are you doing in that context? How are you thinking about responding to this? What we're hearing from most is that they're going to wait and see and hope that this thing clears up so that there's more certainty at some point in the future.
But we'll see how long they can hold on. And I think that's one of the questions that we will be watching very closely.
Yeah, but look, we've got this 90-day pause. And to be clear, it's not actually a pause, right? Tariff rates are still elevated.
And the business response to those is going to be very, very real in the next three months. And that will be characterized by maybe not layoffs, but certainly by companies slowing down on hiring, by slowing down on their capital expenditures.
That will have an effect on the actual real economy, no? It could. You know, we talked to a lot of businesses before, and what they told us was that for the size of the tariffs that they were expecting, they thought they had strategies that could work.
Many were thinking about passing through a bit of the cost. And to me, one of the big questions out there is whether consumers would take them on board.
If the consumers do, then I think businesses would be less stressed and less concerned. But I have to say it's an open question as to whether they will.
We've just had a long period of elevated inflation. When families are seeing this kind of volatility uncertainty as well, they may pull back and be unwilling to do things.
And so we're just going to have to see what the reaction is as all of this plays out. Setting aside the inflation and price level part of this thing, what's your level of concern about the impact on economic growth with these tariffs?

You know, the Atlanta Fed has its FedNow tracker, and we all follow that. And it's, you know, down,

right? Yeah, so it is down. First of all, I'm glad you're following it.
It's a very great tool

for keeping track of things. And it is down.
And I would say what we have heard from our businesses

and what we have seen, and it has not shown up as much in the formal data yet, but we'll see

Thank you. And it is down.
And I would say what we have heard from our businesses and what we have seen, and it has not shown up as much in the formal data yet, but we'll see whether it does, is that everyone is retrenching a bit. Investment is not as forthcoming.
And I think folks are expecting everyone to pause. And that may materially slow down what aggregate growth looks like.
The other thing I would say also for us, though, you know, employment is our mandate, not GDP. Most businesses that we're talking to are telling us that they're willing to basically play a wait and see on that as well.
They're not looking to lay people off. They're not looking to hire either.
I think what we're hearing is stasis for now,

and then we'll see if that posture can support what the future looks like it's going to bring. You know, we've been talking for a good long while now, you and me.
And I, look, we met once in real life. It's a long story involving a restaurant in Pasadena, but that's all.
Yes, I remember that.

But you are, it seems to me, a cautious person by nature. And I don't want to mischaracterize this, but it does seem that the last five or six minutes of this conversation, you have been more cautious than usual and maybe a tad more downbeat.
Is that fair? So cautious for sure. You know, an analogy that I've been using a lot is driving in foggy conditions.

And when you're driving in the fog,

you just got to slow down.

When the fog gets thicker,

you're going to pull over and wait.

I think that's the wise thing to do.

And I think for me, it's pretty clear,

the fog's gotten quite a bit thicker

in the last couple of weeks.

So if you think,

you want to say I'm more cautious than before? Sure. I mean, I do get paid to be cautious, though, so I want to make that clear as well.
In terms of downbeat, look, I think the pressures that are out there are not the best for our mandates. All the models say that introduction of tariffs is going to put upward pressure on prices.
And I've seen more reports of recession fears in the media and from our business context than I've heard in a year and a half or two years.

And so that's also going to put pressure on our mandate, the employment mandate, in a way that is not positive.

But today, I would say we still have a lot to play out.

And as you know, the current environment today might not be the current environment tomorrow.

And so some of these forces may wind up being weaker than they look like they're going to be today.

They could be stronger as well.

And that's another reason why caution, I think, is the most prudent approach today.

Rafael Bostic at the Atlanta Fed.

Thanks again for your time, sir.

Always good to talk to you.

Kai, it's always a pleasure.

Look forward to seeing you again.

Yes, sir.

That's your question. the most prudent approach today.
Rafael Bostic at the Atlanta Fed. Thanks again for your time, sir.

Always good to talk to you.

Kai, it's always a pleasure.

Look forward to seeing you again.

Yes, sir.

Assuming you have seen where Wall Street ended today,

would it help at all

if I told you that at their lows

for the day,

the major indices were down

twice as far down

as where they finished?

Yeah, I didn't think so.

We'll have the details when we do the numbers. Stocks get all the headlines on days, on weeks, I guess I should say, like this, which I get.
But honestly, a lot of the really important action happens in the bond market. You saw that overnight Tuesday into Wednesday, which is what really forced President Trump's hand.
Bond traders were trying to figure out how much or, as it turned out, how little money to put into the safety of U.S. government debt and whether that debt is actually all that safe anymore.
And while all that was happening, the Treasury Department still does have to sell new bonds because this country still needs to borrow a whole lot of money. Marketplace's Justin Ho looked into how those treasury auctions have been going.
Treasury auctions aren't exactly like the auctions you've seen in the movies. There's no fast-talking auctioneer, and bidders don't hold up paddles.
But... People enter bids, and then they find a price.
That's Laura Veldkamp, a finance professor at Columbia. She says buyers aren't actually bidding on how much they'll pay to buy the bond.
What they're actually bidding are yields. Yields are like interest rates.
And so what they're saying is, I'll buy that bond if you pay me this much interest. Veldkamp says when treasury auctions go well.
It means that all of the bonds that the U.S. government wanted to get sold, that somebody actually showed up and bought them, and that they bought them at a price that was roughly what we expected for the price to be.
But treasury auctions don't always go that smoothly. For instance, on Tuesday, the Treasury Department held an auction of three-year notes.
The auction was objectively horrible. Lawrence Gillum is chief fixed income strategist at LPL Financial.
Potential buyers were spooked by the Trump administration's tariffs, and so demand for those three-year treasuries was weaker than expected. So Treasury had to pay up a little bit to help entice demand.
In other words, offer a slightly higher interest rate. The Treasury Department also held auctions for 10 and 30-year notes this week, and Gillum says those went a lot more smoothly.
But he says that weak auction on Tuesday has investors paying much closer attention to how much demand there is for treasuries. If we see a string of auctions that don't go well, that would be a big clue that investors are potentially looking elsewhere.
That would tell us that investors no longer think that U.S. bonds are such a safe investment.
I'm Justin Howe for Marketplace. You know what's a safe investment? Well, first of all, public radio at large, but also an investment of your time, our podcast.
If you miss us on the radio, we get that. Marketplace.org or the.
I dare say some border on paranoia. Tell me you're a federal contractor without telling me you're a federal contractor.
First, though, let's do the numbers. Didn't need to say it, right? The Wawa's? Dow Industrial's down 1,014 points today, 2.5%, 39,593.
The Nasdaq subtracted 737 points, 4.3%, 16,387. The S&P 500 down 188 points, 3.5%, 52.68.
As I said, they were down basically twice as far at their lows for the day around lunchtime on the East Coast. Oil prices dipped around 3%.
Today, Brent crude the international benchmark trading around $63.50 a barrel.

The stock of used car dealer CarMax took a hit today after reporting earnings that missed expectations.

Shares down 17%.

Constellation Brands, maker of Modelo Especial and Corona Extra Beers, posted a weaker than expected outlook.

The partial tariff pause.

That's in your quotes.

That pause.

The President Trump announced yesterday does not apply to certain sector specific tariffs, including, think beer cans, right? Aluminum. Constellation Brands ticked up three quarters of one percent today.
Bonds fell. The yield on the 10-year T-note increased to 4.42 percent.
Think about that for a second. You had stocks going down, bond prices going down.
That is unusual. And you're listening to Marketplace.
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That's reputationdefender.com slash success. This is Marketplace.
I'm Kai Rizdahl. Inflation has been sticky the past year or two, as you've heard here and elsewhere.
Sticky-est, perhaps, in housing. The CPI that was out today showed shelter costs up 4% year over year.
That's slower, yes, but prices in housing are still going up faster than the overall rate of inflation. Shelter costs includes both renting and buying, and those higher prices are forcing tough decisions.
We started a new series yesterday about people from different economic walks of life and how they are experiencing what's happening out there. Lived economies, it's called.
Today, Ashley Ayala. She's 36, an insurance appraiser, trying to be a first-time homebuyer as the median age of first-time homebuyers in this economy keeps on going up.

Marketplace's Kristen Schwab has the story from Austin.

Everyone has that thing they splurge on.

For Ashley Ayala, it's Le Crusade.

Cast iron pots and pans that come in a rainbow of colors.

We're standing in Ayala's kitchen with boxes of cookware littered around us.

Oh, here's a brazier.

Wow.

An oyster. This is my original color.

Thank you. of cookware littered around us.
Oh, here's a brazier. Wow.
An oyster. This is my original color.
But this is the agave color that I love. It looks like you've not used it yet.
I haven't because I just like to have them. I ask how much she's spent on the brand.
She starts pointing at pots. Le Crusade and a house of her own.
That is Ayala's adult dream,

or at least part of it. You see, Ayala is 36 years old.
She rents an apartment in Kyle, Texas, outside of Austin. And in her words, she's ready to be an adult, an adult who owns a home.

But there are some hurdles. Ayala's salary as an insurance appraiser is around $75,000.
Last year was unusual. She made $130,000 with overtime.
But some of that has gone to help her mom and brother. Lately, she's been paying his rent.
And so she isn't confident her base salary of $75,000 can cover a mortgage alone. Buying a house is such a large expense that it doesn't feel tangible.
In the meantime, why not spend her disposable income on cookware? This is a theme a lot of millennials are grappling with. Homeownership feels out of reach.
Meanwhile, people are marrying later in life or staying single altogether. A Pew study of 2021 census data says 25% of 40-year-olds had never been married.
That number was 6% in 1980. And that gets us to Ayala's other dilemma.
She's in a new-ish relationship and doesn't know if she should wait and see where it goes or pursue homeownership now alone.

To figure it out, she started looking at houses.

So I have these info sheets for you just on the two houses that we're going to see.

Ayala's realtor is showing us a 1,500-square-foot single-family home listed for just under $270,000.

It looks a bit builder-grade.

I see Ayala eyeing what appears to be laminate countertops. It's nice.
Yeah. I feel like anyone with ears can hear how unenthusiastic she is.
In the car after, I ask what she really thinks. I know this is going to sound horrible, but does it feel a little bit cheap? Right? There was nothing that was like, wow, I really like this.

What do you want out of it that's not there?

Grown up Ashley is like, hey, I'm hosting Thanksgiving.

Everyone's coming over. There's like a nice kitchen.

Tons of space for people to like sit and eat.

It feels like, does it feel all or nothing to you? Yeah. Why is that, do you think? Because I'm almost 40.
Fact check, Ayala is 36. But the takeaway is that she feels behind.
After another showing, Ayala drives us to her dream neighborhood, one of those ginormous new housing communities.

It has its own bus stop, two lazy rivers.

See, these houses are significantly bigger.

They're much bigger.

These are not what I would call like starter homes.

No.

We park and check out a fully staged model unit.

These homes run about a thousand square feet bigger than the other house we saw for up to double the price.

Look, my office.

I already know. You don't have to tell me.

That new voice you hear is Ayala's boyfriend, James Hillfiker, who's joined us for this showing.

They've been together for about half a year.

Hillfiker is 39, and up until last fall, he was at the same adulting crossroads as Ayala. Go it alone or wait for a partner to take big life steps.
Except Hillfiker made a decision. He bought 50 acres of land in rural Texas, four hours from Austin.
To me, it's very peaceful, right? Currently, the nearest neighbor is two miles away. We're back at Ayala's apartment now, taking stock of the day.
Hillfiker wants to homestead. He's building a ranch, livestock and all.
And he's asked Ayala to join him. But her family is here in Austin.
And she likes the conveniences of suburban living, going to the movies and to Target. I ask how they're going to find some sort of compromise.
I want to support her as much as I can. Like, why would I keep you from chasing your dreams, right? And I think there's a way to coexist.
I hear you. But by its very definition, buying a house here is a huge permanent step away from building anything with you.
Yeah, I know. Ayala didn't end up buying any of the houses we saw that day, but she's still looking and still trying to figure out what kind of grown-up Ashley she'll be.
In Kyle, Texas, I'm Kristen Schwab for Marketplace. This is one of those weeks where you wake up and you say, man, what is happening out there?

Might I offer a suggestion?

David Broncaccio and the Marketplace Morning Report.

They get up in the middle of the night to make sure you know what's going on.

Check it out. The End Thank you.
Not to be forgotten amid all the news of the damage it's doing to the American economy is the Trump administration's dismantling of large parts of the federal government. And that's not just limited to federal employees.
It affects federal contractors, too, and so spills over into the private sector economy. The government spends nearly $800 billion a year paying businesses to provide all kinds of services, from cleaning and janitorial to high-tech engineering.
Washington's had policies in place for decades that give a leg up to women and minority-owned businesses providing those services had, being the operative word there, thanks to an executive order that, as Marketplace's Kimberly Adams reports, has businesses that benefited from those programs worried about their future. Decades of policies designed to level the playing field for minority and women-owned businesses have given a big boost to many members of the U.S.
Minority Contractors Association. Larry Bullock is president of the group, which represents about 220 companies across the U.S.
The bulk of our firms are into the infrastructure. That means that they do site work, roads, hauling, concrete, asphalt, utilities.
Many of these firms are certified by the federal government to compete for contracts that are set aside for what are known as small disadvantaged businesses. The executive orders don't explicitly cancel these programs, but...
Several of our firms are fearful. I dare say some border on paranoia.
That's because, according to Dominique Casimir, a partner at the law firm Blank Rome... The executive order that the president signed on his first day in office directed the government to terminate all government contracts that they view as being equity related.
That order and others are being challenged in court. We reached out to the Small Business Administration for comment on this issue, but didn't hear back before our deadline.
While we've already seen the government cancel contracts tied to specific DEI programs, it's less clear what these orders mean for minority contractors. But we have some signs.
See, the federal government has traditionally set targets for what percentage of each agency's contracts should go to disadvantaged businesses. Deepak Bhatt is at GovSpend, which tracks federal contracting data.
That spending in 2024 was 9.8 percent. So this is about 76 billion dollars.
The Trump administration has reset the target for these contracts to just 5 percent. It's a floor, not a ceiling.
But, says Bhatt, That could amount to about $38 billion of contract spending that's

currently going to a small disadvantaged business that will potentially no longer go to some of

those companies. Bott says many minority-owned contracting companies have built their business

strategies around these targets and set-asides as a way to compete for contracts against bigger,

better-connected or resourced firms.

But given the current administration's anti-DEI push,

Everybody's terrified right now that their contracts will be terminated.

Everybody is terrified right now of just drawing a spotlight.

That's lawyer Dominique Casimir, a partner at Blank Rome again.

She says her clients are scrambling to make sure their programs and policies don't run afoul of new and shifting contracting guidelines. What you're seeing right now is government contractors making all sorts of changes to their programs because they don't want to become the target of a government investigation.
All of the multiple minority-owned contracting firms I reached out to for this story declined to speak on the record for the same reason. Members of the U.S.
Minority Contractors Association were wary of drawing attention to themselves, too. Nevertheless, says Larry Bullock, the association's president, his group is planning to fight these executive orders in court.
In the meantime, he's advising members to turn to other levels of government as a backup plan. We've encouraged our members to look at the local and state government policies that say the people who are in a certain geographic demographic area should get an opportunity to participate.
They call them local preferences. Because he says some communities are digging in on their diversity commitments,

even as the administration pulls back on the federal governments.

In Washington, I'm Kimberly Adams for Marketplace. This final note on the way out today, you're a major American company, global in fact.
Your flagship product is made overseas.

You wake up to see that tariffs are not, in fact, paused.

What do you do?

You take 600 tons of iPhones, about a million and a half of them,

and you put them on a couple of planes to the U.S. from India.

That's what you do.

Reuters had the story.

More stories from this tariff economy coming up tomorrow.

John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Petra, and Stephanie Seek are the Marketplace editing staff.

Amir Bibawe is the managing editor.

And I'm Kyle Rizdahl.

We will see you tomorrow, everybody. This is APM.
This old house has been America's most trusted source for all things DIY and home improvement for decades.

And now we're on the radio and on demand.

I think you're breaking into this wall regardless.

I was hoping you wouldn't say that. I need to go and get some whiskey, I think.

I would get the whiskey for sure.