Bond yields have surged following Donald Trump’s reelection, sending a signal that consumers could face rising borrowing costs. The 10-year Treasury yield increased by 18 basis points to 4.477%, its highest since July 1, while the 30-year Treasury yield jumped 24 basis points, marking its most significant increase since March 2020. This rise in yields indicates that mortgage and loan rates could climb, pressuring borrowers.

The increase in bond yields is driven by expectations that Trump’s fiscal policies, which include tariffs, tax cuts, and immigration changes, will fuel inflation. This inflationary outlook could prompt the Federal Reserve to reconsider its interest rate cuts, potentially leading to tighter monetary policy. As a result, mortgage rates, which track Treasury yields, could surpass 7%, which would reduce affordability for homebuyers.

While the Federal Reserve is still expected to cut rates by 25 basis points in the near term, the likelihood of additional rate cuts in December has decreased. Economists speculate that the Fed might slow its rate cuts in response to the economic changes that Trump’s policies could bring. Additionally, with Trump now in office for a second term, he could influence the Federal Reserve by nominating a new chair who is more aligned with his views on interest rates.