Graphic used to denote By the Numbers articles

Economy probably still not out of the woods

U.S. must sell around $9T in bonds this year to fund existing deficits

BySteve Wyett
April 11, 20256 min read

What a roller coaster of a week in the capital markets. We continue to be buffeted by news on the tariff front as markets desperately try to find a valuation that adequately compensates for a now uncertain level of growth and earnings. The fact that we started at fairly rich multiples and an outlook for ongoing growth doesn’t help as we think about what price to pay for a stock, or index, today.

We began the year with a relatively benign outlook and anticipated growth to slow from the above-trend rates of the last couple of quarters. Included within that outlook were, of course, some risk factors. The biggest risk we saw was some geopolitical event that could shock the economy into slowing more than anticipated. The list of potential shocks was centered on an unwanted escalation in the Middle East, the ongoing war between Russia and Ukraine—or, the big one we thought—China making a move on Taiwan. The geopolitical event we did not have as a risk factor was a press conference in the Rose Garden of the White House.

Graph of 10-year treasury yield for April 2025.

It was not the announcement of tariffs that spurred the recent volatility, as we had been talking about them for some time. However, the level of tariffs announced was way higher than the market anticipated, resulting in a much higher “cost” to businesses and consumers and leading to significant downgrades to economic forecasts. Indeed, until the President pressed “pause” on the full implementation of the higher “reciprocal” tariff levels for 90 days, some economic forecasts moved to a recession as the base case. These forecasts were revised back up after the pause, but we still have a 10% tariff across the board, plus additional tariffs on steel and aluminum and very high tariffs on China. All this means there is still a headwind to growth, and the tariff levels on China are material in their impact.

Why did the President blink? Going into this second term of a Trump Presidency, there was a sense he would temper his actions, if not his words, to avoid doing any significant damage to the stock market. We all know he watches the markets closely and uses them from time to time, rightly or wrongly, as a scorecard of how he is doing. However, it appeared this time, he was more willing to allow stocks to fall with his eye on the bigger picture of remaking domestic and global trade. And he may very well have been willing to do that until the bond market reminded him who the boss is in the capital markets.

To paraphrase James Carville, “It’s the bond market, stupid.” The increase in longer bond yields, even as stocks declined, along with signs of stress at the short end of the curve, signaled that the potential was there for a liquidity crisis. A liquidity crisis in the bond market “trumps” all on the spectrum of risks as this puts not only insolvent companies at risk but also solvent companies. The shift in tariff policy does not mean we are out of the woods, but the administration knows they need to tread lightly as we have some $9 trillion in bonds to sell this year to fund our existing deficits. Why rates move matters.

Disclosure

Download the full report

Get By the Numbers delivered to your inbox.

Subscribe (Opens in a new tab)

Related Content

    BOK Financial Corporation is a more than $50 billion regional financial services company headquartered in Tulsa, Oklahoma with more than $105 billion in assets under management and administration. The company's stock is publicly traded on NASDAQ under the Global Select market listings (BOKF). BOK Financial Corporation's holdings include BOKF, NA; BOK Financial Securities, Inc., and BOK Financial Private Wealth, Inc. BOKF, NA's holdings include TransFund and Cavanal Hill Investment Management, Inc. BOKF, NA operates banking divisions across eight states as: Bank of Albuquerque; Bank of Oklahoma; Bank of Texas and BOK Financial (in Arizona, Arkansas, Colorado, Kansas and Missouri); as well as having limited purpose offices Nebraska, Wisconsin, Connecticut and Tennessee. The entities held by BOK Financial Corporation are periodically referred to collectively as BOK Financial Corporation Group. Through its subsidiaries, BOK Financial Corporation provides commercial and consumer banking, brokerage trading, investment, trust services, mortgage origination and servicing, and an electronic funds transfer network. For more information, visit www.bokf.com.

    Securities, insurance, and advisory services offered through BOK Financial Securities, Inc., member FINRA/SIPC and an SEC registered investment adviser. Services may be offered under our trade name, BOK Financial Advisors.

    Investments involve risk, including loss of principal. Past performance does not guarantee future results. There is no assurance that the investment process will consistently lead to successful investing. Asset allocation and diversification do not eliminate the risk of experiencing investment losses. Risks applicable to any portfolio are those associated with its underlying securities.

    INVESTMENT AND INSURANCE PRODUCTS ARE: NOT FDIC INSURED | NOT GUARANTEED BY THE BANK OR ITS AFFILIATES | NOT DEPOSITS | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE.

    The content in this article is for informational and educational purposes only and does not constitute legal, tax or investment advice. Always consult with a qualified financial professional, accountant or lawyer for legal, tax and investment advice. Neither BOK Financial Corporation nor its affiliates offer legal advice.

    BOK Financial® is a trademark of BOKF, NA. Member FDIC. Equal Housing Lender . © 2025 BOKF, NA.