Be sure to see the thread “Treasuries, another bubble?”

http://piggington.com/treasuries_another_bubble

Two questions I have about the last weeks treasury action. 1) Will this continue, or is this just people liquidating treasuries for temporary reasons? 2) Just how high will the yield on 10yrs go, and what will be the impact on housing?

I think it remains to be seen if treasury yields will continue to rise. They’ve given reason to believe they were going to rise several times in recent years, but always came back down before getting very far out of hand.

Given the unattractiveness of mortgages to most investors now (the US Govt. not included) what would happen to mortgage rates if 10yrs went to 5%, what about 10yrs at 6% or even more? Is it safe to assume that mortgages (30yr fixed) will stay at rates at least a couple percent above 10years? How will we have a housing recover if mortgage rates go up?

If rates do go up, will the government still be able to pursue all these bailouts? Could the fed start buying 10yrs to drive down long term rates? If so, wouldn’t they have to print money to do that, causing more problems?

XBoxBoy

Be sure to see the thread “Treasuries, another bubble?”

http://piggington.com/treasuries_another_bubble

Two questions I have about the last weeks treasury action. 1) Will this continue, or is this just people liquidating treasuries for temporary reasons? 2) Just how high will the yield on 10yrs go, and what will be the impact on housing?

I think it remains to be seen if treasury yields will continue to rise. They’ve given reason to believe they were going to rise several times in recent years, but always came back down before getting very far out of hand.

Given the unattractiveness of mortgages to most investors now (the US Govt. not included) what would happen to mortgage rates if 10yrs went to 5%, what about 10yrs at 6% or even more? Is it safe to assume that mortgages (30yr fixed) will stay at rates at least a couple percent above 10years? How will we have a housing recover if mortgage rates go up?

If rates do go up, will the government still be able to pursue all these bailouts? Could the fed start buying 10yrs to drive down long term rates? If so, wouldn’t they have to print money to do that, causing more problems?

XBoxBoy

I think the extreme burst of pessimism last week made recent Treasury yields too low, and now we’re seeing a snap back.

In the longer run, all the private debt that people don’t want to take responsibility for repaying is being converted into public debt. Supply of Treasuries will exceed demand at low rates, and rates will rise.

Be careful, though, because a rise in rates will be opposed by govt, because borrowers don’t want to pay high rates, and more voters see themselves as borrowers than as savers. So we may see a capping of Treasury rates. (After all the new govt intervention we’ve seen in the last year, don’t be surprised at this.) At that point, the dollar will drop. I think the short term chain reaction will stop there, although it’s conceiveable currency controls and “official” dollar exchange rates could be imposed. I doubt things will get that extreme.

In the longer term, the drop in the dollar and very high public spending will create inflation. People will be encouraged to get into fixed rate mortgages before that. When most are in fixed rate mortgages, inflation will be allowed to rise, and all long term fixed interest debt will be thereby devalued. Long treasury rates (including the 10-T) will then rise too.

After the debt is sufficiently devalued, inflation will be extinguished, and the various interest rate and other controls will be pulled back.

Were you looking more for a prediction of 10T 6 months from now, SDR?

I think the extreme burst of pessimism last week made recent Treasury yields too low, and now we’re seeing a snap back.

In the longer run, all the private debt that people don’t want to take responsibility for repaying is being converted into public debt. Supply of Treasuries will exceed demand at low rates, and rates will rise.

Be careful, though, because a rise in rates will be opposed by govt, because borrowers don’t want to pay high rates, and more voters see themselves as borrowers than as savers. So we may see a capping of Treasury rates. (After all the new govt intervention we’ve seen in the last year, don’t be surprised at this.) At that point, the dollar will drop. I think the short term chain reaction will stop there, although it’s conceiveable currency controls and “official” dollar exchange rates could be imposed. I doubt things will get that extreme.

In the longer term, the drop in the dollar and very high public spending will create inflation. People will be encouraged to get into fixed rate mortgages before that. When most are in fixed rate mortgages, inflation will be allowed to rise, and all long term fixed interest debt will be thereby devalued. Long treasury rates (including the 10-T) will then rise too.

After the debt is sufficiently devalued, inflation will be extinguished, and the various interest rate and other controls will be pulled back.

Were you looking more for a prediction of 10T 6 months from now, SDR?

I think the extreme burst of pessimism last week made recent Treasury yields too low, and now we’re seeing a snap back.

In the longer run, all the private debt that people don’t want to take responsibility for repaying is being converted into public debt. Supply of Treasuries will exceed demand at low rates, and rates will rise.

Be careful, though, because a rise in rates will be opposed by govt, because borrowers don’t want to pay high rates, and more voters see themselves as borrowers than as savers. So we may see a capping of Treasury rates. (After all the new govt intervention we’ve seen in the last year, don’t be surprised at this.) At that point, the dollar will drop. I think the short term chain reaction will stop there, although it’s conceiveable currency controls and “official” dollar exchange rates could be imposed. I doubt things will get that extreme.

In the longer term, the drop in the dollar and very high public spending will create inflation. People will be encouraged to get into fixed rate mortgages before that. When most are in fixed rate mortgages, inflation will be allowed to rise, and all long term fixed interest debt will be thereby devalued. Long treasury rates (including the 10-T) will then rise too.

After the debt is sufficiently devalued, inflation will be extinguished, and the various interest rate and other controls will be pulled back.

Were you looking more for a prediction of 10T 6 months from now, SDR?