Posted on 09/05/2013 10:54:46 AM PDT by Deo volente
NEW YORK (MarketWatch) — Treasury prices tumbled on Thursday as the benchmark 10-year note yield pushed to the brink of 3%, a psychological threshold emblematic of its sharp climb since early May.
(Excerpt) Read more at marketwatch.com ...
This is not good news for the housing market, which has weakened in recent weeks, nor for the debt-based economy.
I’ve been watching this interest rate for the last 5 years with...great interest. If it hit 4% we are all so screwed.
This bears watching, because there’s a great deal of “easy money” sloshing around all the markets.
When the 10 year T market falls off and rates go back up again, a whole lot of “easy money” assumptions come off the table and lots of markets will take a hit. Starting with the pseudo-recovery in housing.
Toss me a clue? Why is 4% bad? What are the ramifications?
Thanks
we borrow so much on a daily basis that an increase of just a percentage point would make the INTERESTE ALONE on the national debt greater than we can pay
As an expert can you explain the mechanism for the screwing at 5%?
Okay, I get you on that part, makes sense. What drives this particular interest rate?
(apologies for being obtuse on this, input is appreciated)
No problem. Obama will just have the Federal Reserve crank up the money printing machines.
That will cause mortgage rates to dramatically increase, thus slamming the brakes on a modest housing recovery. It reduces the number of people who can qualify and also reduces the amount of house you get for the same payment dollar. Also, other debt instruments - credit cards, car load, student loans, etc. are based on the T-note rate. The rippling effect of the increase - particularly so much too fast will kill the recovery.
This is the benchmark rate, on which such things as mortgages and credit cards are based. When it goes up, borrowing costs for Americans follow suit.
At 3% a lot of market type folks will panic. As stated it is a psychological barrier. It indicates that not as many people are buying T bills. When sales of US backed bonds fall off it is bad. Think of what gets financed by the sale of those bonds. Think of the ramifications. QE4. QE5....which triggers rampant inflation. And unfortunately...probably without any kind of deflationary cycle to precede it. I’ve been kind of counting on that before the dollar goes into the crapper.
Meanwhile, the middle class is being starved. Nobody can save for future retirements. Those who are retired are spending principal, when they should've been able to count of at least 4% interest on savings....all money that would go directly into the economy.
Besides that, higher interest rates on mortgages might make them more available. Sellers will adjust the price, and the new owners might even make out with that interest being tax deductible.
The economy is stagnant. The rich are getting their wealth and power concentrated. And the little guy can't catch a break. So tell me where this low interest rate economy has helped us.
Who said I was an expert?
The market will slosh when the half of the $85 billion PER MONTH the government buys equities with goes away. Half a trillion per year OUT of the market on a day to day basis
I remember some idiot Democrat saying that the national debt was not that bad because it was money we owe ourselves... and if someone owes you a few billion dollars then that’s not so bad
After patting themselves on the back in one of the most embarrassing displays I have ever seen (where Liesman makes a call that looked right for about an hour, only to be spectacularly wrong by the end of the day), the clown that is Cramer assured us that we would see 2.65 well before we would see 3.00 on the 10 year, dismissing the notion that rates could rise. But they will. And, IMHO, there isn’t going to be much resistance at 3.
A lot of the homes sold right now in southern California are being bought by wealthy Chinese industrialists and tycoons, as business investments. When the media trumpets the so-called recovery in housing, one needs to look beneath the surface at where the money is coming from.
http://money.cnn.com/2013/07/08/real_estate/chinese-homebuyers/index.html
Cramer told his viewers in February of 2000 to buy and hold a bunch of dot.com and tech companies, most of which began to crash the following month.
And he’s still on the air 13 years later. Incredible.
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