if record low rates figure into your one year forecast, that implies that rates still have to be here next year
I’ve been thinking rates would drop all year, and will probably stay low or fall further.
This is mostly because they are so crazy low in Europe and Japan right now. Why not here? Why can the 10-year rate in Japan, Germany, France, Holland, UK, Switzerland and Denmark all go to 0 or even -0.5, but our rate stay above 1%?
I know the “official reasons” why US rates are higher: higher expected inflation, economic growth, and currency depreciation. The problem is that other US asset prices should also be lower if people are expecting a weak dollar, but they are not. US stocks are doing great and loved by foreigners, but our Treasuries simply are not loved as much. I also do not think there is much reason to think the dollar will weaken over the long term v. yen and euro.
Anyway, seems like a reasonable overview… I just had to bite on the one bearish factor… 😉
OK, here’s one more bearish factor: student debt is exploding and reducing the the ability of younger buyers to get credit or save down payments.
This is bearish, but I think looking at total private household debt shows that it is partly offset by other categories of debt going down compared to prior years. Mortgage and revolving household debt went down a lot in the recession and have not recovered. And if you go another step further, and consider low rates over the past five years, the monthly cost to service existing mortgage debt may be on the low side historically, and mortgage debt is by far the largest U.S. household debt.
