Federal gov’t needs to declare bankruptcy and go to hell.
By Daniel at 28 December, 2009, 12:36 am
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Bloomberg: Yields on benchmark 10-year notes will climb about 40 percent to 5.5 percent, the biggest annual increase since 1999, according to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The surge will push interest rates on 30-year fixed mortgages to 7.5 percent to 8 percent, almost the highest in a decade, Greenlaw said.
Investors are demanding higher returns on government debt, boosting rates this month by the most since January, on concern President Barack Obama’s attempt to revive economic growth with record spending will keep the deficit at $1 trillion. Rising borrowing costs risk jeopardizing a recovery from a plunge in the residential mortgage market that led to the worst global recession in six decades.
“When you take these kinds of aggressive policy actions to prevent a depression, you have to clean up after yourself,” Greenlaw said in a telephone interview. “Market signals will ultimately spur some policy action but I’m not naive enough to think it will be a very pleasant environment.”
If that’s true, that will obviously put further downward pressure on residential real estate prices. people buy payments, not asset values. so if this true, housing prices will resume sliding.
“The Treasury will sell a record $2.55 trillion of notes and bonds in 2010, an increase of about $700 billion, or 38 percent, from this year, Morgan Stanley estimates.”
$2.55 trillion. That is just shy of 20% of the U.S. annual GDP. That, my nascent statist comrades, is a hefty sum of capital, and will be competing with other assets for that capital. One must ask oneself just how well the equity markets will remain aloft if the Treasury auctions start to look a tad bit shaky. Keep an eye on those bid-to-cover ratios on the 30-year auctions for signs of brewing trouble.
Leadership. Morals. What’s my cut?
What people did with lower interest rates was build larger houses. This could be a god thing in the long run.
- just.a.guy
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