Posted on 08/16/2013 1:14:02 PM PDT by whitedog57
The Treasury 10 year yield rose today to its highest level in 2 years.
ust10081613
Now for the bad news: the Treasury 10 year yield is pulling from from the German 10 year Bund yield.
treasybundso
The rising 10 year Treasury will likely cause the 30 year fixed-rate mortgage to rise.
treas10mort
Here is a chart of fixed-rate, ARM versus the 10 year Treasury.
frmarmmay1
Got ARMs?
It may not be ‘coming undone’ it just may be that the low interest rates are unsustainable. Which they are. And the government is finally just letting them rise.
I think that’s a good thing as higher rates mean people can afford less debt.
We’re too addicted to debt as a society and it’s time to deal with the pain.
Clearly ust10081613 treasybundso treas10mort frmarmmay1.
The Government needs cheap interest to keep the Entitlement State going. That is what it has ALWAYS been all about.
The thing to realize is that is that we have very well have seen the dead bottom of a rate decline that has taken THIRTY YEARS to reach its nadir. Rates did not of course fall in a straight line; there were sawtooths and zigs and zags. But this, specifically, the unwinding of this, has the deepest of implications. A tremendous amount of leverage is likely to come out of the system.
If you look on the other side of the ledger, you’ll notice that technology trends suggest that there is an immense shift of capital flows back to the USA in the offing that will likely take another 30 years to run its course.
Omen? Much as I sympathize with the alarm by those who are concerned about our national solvency, an increasing spread between short-term and long-term bond rates is a sign of future economic growth, not calamity. Shortly before the 2007/2008 panic, the bond curve when sharply negative; that’s when to worry.
“The Government needs cheap interest to keep the Entitlement State going. That is what it has ALWAYS been all about.”
of course you’re right. here’ s one small example.
my mom lives in elderly housing. there is a woman there, she’s maybe 80, can barely speak enlish, she’s possibly from Lebanon, here is our contribution to her:
hoverround
rent subsidy
food stamps
free electric, heat, water, no taxes
Obama phone
medicare
we cannot sustain bringing someone to this country and giving them the above dollar amount. the system will break.
This is the only thing that can get the government under control.
As a retiree, I welcome hgher interest rates. Saw that the 30 yr. bond is approaching 3.9%. I am guessing it reaches near 5% by year end. (If Bungling Ben slows down QE like he claims)
“As a retiree, I welcome hgher interest rates.”
And I welcome them for you! This ‘quantitative easing’ has been nothing but deliberate inflation that has stolen over 40% of YOUR savings from the past decade and it’s robbed you of interest that the banks should have been paying to you.
On an aside, I hope you have some gold or some silver set aside for a rainy day because if the rug gets pulled out from under our hyper-inflated dollar it’ll crash overnight and a little hedge might be a good idea so you can buy groceries or pay your bills.
Yep, the US is spread to about 1 above the bund. The propaganda about QE being stopped is beginning to have an effect. The dollar is propped up a little longer for those with an interest in that, but the consequences are going to be rough (higher rates contagion, big slowdowns in activity...ultimately, haircuts for bond holders and pensions). We don’t have the kind of manufacturing base and exports to support a propped up dollar.
And oil is still high. Developing countries continue to use more of it—propaganda about China collapse since 2007 notwithstanding.
“And oil is still high.”
Most believe this is over Mideast turmoil. Very traditional, really, to see high oil on Mideast chaos.
It may or not become undone but here is some perspective on the rise in interest rates as it regards debt service.
That’s a good and true point. Meanwhile, though, there are manufacturing increases and more new drivers in east Asia each year.
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