Agreed that the low 10 year is best for the housing recession however the best way to get the correction underway would be a higher 10 year. As long as the 10 year is low then there is some facet of affordability to the housing market. Actually 3.78 is pretty darn low if you look at the 10 year yield back to 1965. In fact the two lowest points we have had SINCE 1965 have been the yield a few weeks ago and the yield back in 2003.
I do not argue about the possibilities of a Japan style scenario that occurred in the 90s. However one thing I have never heard anyone explain is how we will continue to get our astronomical debt financed at 1-2% treasury yields.
The other thing that is somewhat “not fitting the data” in my opinion is the low inflation expectations. While the “official” measurement du jour of inflation does not indicate high inflation, anyone that has kids and has to buy alot of milk will tell you otherwise. Similarly nobody can honestly say with a straight face that you cannot count energy costs for inflation. So while there may be an official inflation number that is in check so to speak, the reality of the situation is that a measureable amount of personal income does indeed go to basic goods and services in comparison to the no to distant pass cost of those same goods and services.
Don’t get me wrong, Your point may be correct. Just to be sure though, you are saying that you believe the 10 year will hit levels that it basically has never hit before. Which would be awesome for housing. A 10 year at 1.5% puts a fixed rate conforming loan at 3%… Not bad at all. At the same time our debt will continue to be financed by foreign entities who will buy these instruments at that low of a yield.
