10 year at 4.16!

[SD Realtor]

4.16% on the 10 year treasury yield. Quite interesting.

[(former)FormerSanDiegan]

Also of note, is that the LIBOR index has fallen steadily over the past several months. The beginning of the decline was about the time the FED cut rates.

The 1-year LIBOR is down to 4.6375%.

See plot here
http://www.moneycafe.com/library/libor.htm

Consider the Loan re-sets that are scheduled in the next 18 months. Most of the sub-prime loans will reset within the next 8 months. We all know that those people are screwed.

However, the next wave after that is more heavily Alt-A and Prime loans, that were initiated with 3- to 5-year resets. Some folks have speculated that that is when the Fit really hits the Shan.

Consider that typical Alt-A and Prime borrowers were getting loans tied to 1-year LIBOR + 2.25% (or similar) up through at least early 2006.
Their reset rates would now be less than 7%.

The severity of the “second wave” of loan resets will depend heavily on rates. My position is that the second wave will not be as bad as the first if we see continued downward pressure on interest rates (which we typically do see in slowdowns /recessions). It is worth keeping an eye on this factor over the next 18-24 months.

[(former)FormerSanDiegan]

Also of note, is that the LIBOR index has fallen steadily over the past several months. The beginning of the decline was about the time the FED cut rates.

The 1-year LIBOR is down to 4.6375%.

See plot here
http://www.moneycafe.com/library/libor.htm

Consider the Loan re-sets that are scheduled in the next 18 months. Most of the sub-prime loans will reset within the next 8 months. We all know that those people are screwed.

However, the next wave after that is more heavily Alt-A and Prime loans, that were initiated with 3- to 5-year resets. Some folks have speculated that that is when the Fit really hits the Shan.

Consider that typical Alt-A and Prime borrowers were getting loans tied to 1-year LIBOR + 2.25% (or similar) up through at least early 2006.
Their reset rates would now be less than 7%.

The severity of the “second wave” of loan resets will depend heavily on rates. My position is that the second wave will not be as bad as the first if we see continued downward pressure on interest rates (which we typically do see in slowdowns /recessions). It is worth keeping an eye on this factor over the next 18-24 months.

[(former)FormerSanDiegan]

Also of note, is that the LIBOR index has fallen steadily over the past several months. The beginning of the decline was about the time the FED cut rates.

The 1-year LIBOR is down to 4.6375%.

See plot here
http://www.moneycafe.com/library/libor.htm

Consider the Loan re-sets that are scheduled in the next 18 months. Most of the sub-prime loans will reset within the next 8 months. We all know that those people are screwed.

However, the next wave after that is more heavily Alt-A and Prime loans, that were initiated with 3- to 5-year resets. Some folks have speculated that that is when the Fit really hits the Shan.

Consider that typical Alt-A and Prime borrowers were getting loans tied to 1-year LIBOR + 2.25% (or similar) up through at least early 2006.
Their reset rates would now be less than 7%.

The severity of the “second wave” of loan resets will depend heavily on rates. My position is that the second wave will not be as bad as the first if we see continued downward pressure on interest rates (which we typically do see in slowdowns /recessions). It is worth keeping an eye on this factor over the next 18-24 months.

[(former)FormerSanDiegan]

Also of note, is that the LIBOR index has fallen steadily over the past several months. The beginning of the decline was about the time the FED cut rates.

The 1-year LIBOR is down to 4.6375%.

See plot here
http://www.moneycafe.com/library/libor.htm

Consider the Loan re-sets that are scheduled in the next 18 months. Most of the sub-prime loans will reset within the next 8 months. We all know that those people are screwed.

However, the next wave after that is more heavily Alt-A and Prime loans, that were initiated with 3- to 5-year resets. Some folks have speculated that that is when the Fit really hits the Shan.

Consider that typical Alt-A and Prime borrowers were getting loans tied to 1-year LIBOR + 2.25% (or similar) up through at least early 2006.
Their reset rates would now be less than 7%.

The severity of the “second wave” of loan resets will depend heavily on rates. My position is that the second wave will not be as bad as the first if we see continued downward pressure on interest rates (which we typically do see in slowdowns /recessions). It is worth keeping an eye on this factor over the next 18-24 months.

[(former)FormerSanDiegan]

Also of note, is that the LIBOR index has fallen steadily over the past several months. The beginning of the decline was about the time the FED cut rates.

The 1-year LIBOR is down to 4.6375%.

See plot here
http://www.moneycafe.com/library/libor.htm

Consider the Loan re-sets that are scheduled in the next 18 months. Most of the sub-prime loans will reset within the next 8 months. We all know that those people are screwed.

However, the next wave after that is more heavily Alt-A and Prime loans, that were initiated with 3- to 5-year resets. Some folks have speculated that that is when the Fit really hits the Shan.

Consider that typical Alt-A and Prime borrowers were getting loans tied to 1-year LIBOR + 2.25% (or similar) up through at least early 2006.
Their reset rates would now be less than 7%.

The severity of the “second wave” of loan resets will depend heavily on rates. My position is that the second wave will not be as bad as the first if we see continued downward pressure on interest rates (which we typically do see in slowdowns /recessions). It is worth keeping an eye on this factor over the next 18-24 months.

[4plexowner]

At this point, ‘flight to safety’ still means ‘buy US Treasuries’ – as people buy treasuries the yield drops

Brian Bloom (Australian analyst who publishes some sound articles) points out that as the yields on the US Treasuries drop it becomes less and less attractive for foreigners to invest in the US – there are better interest rates being paid in other parts of the world

http://www.gold-eagle.com/editorials_05/bloom111507.html

Lower rates on 10 year Treasuries typically mean lower interest rates on mortgages so in the short term the dropping yields are probably a good thing for US consumers – from a macro perspective the declining yields increase the speed at which foreign money is going to leave our country

I think we will increasingly see ‘flight to safety’ include the precious metals – right now, some of the hot money (think hedge funds – 8000 of them) invested in the precious metals can be forced into selling their precious metals positions in order to cover other losses (they have to sell something that has a bid and right now none of their garbage paper has an acceptable bid) – this dynamic can cause the precious metals to drop when a ‘flight to safety’ perspective would expect the metals to increase in price

[4plexowner]

At this point, ‘flight to safety’ still means ‘buy US Treasuries’ – as people buy treasuries the yield drops

Brian Bloom (Australian analyst who publishes some sound articles) points out that as the yields on the US Treasuries drop it becomes less and less attractive for foreigners to invest in the US – there are better interest rates being paid in other parts of the world

http://www.gold-eagle.com/editorials_05/bloom111507.html

Lower rates on 10 year Treasuries typically mean lower interest rates on mortgages so in the short term the dropping yields are probably a good thing for US consumers – from a macro perspective the declining yields increase the speed at which foreign money is going to leave our country

I think we will increasingly see ‘flight to safety’ include the precious metals – right now, some of the hot money (think hedge funds – 8000 of them) invested in the precious metals can be forced into selling their precious metals positions in order to cover other losses (they have to sell something that has a bid and right now none of their garbage paper has an acceptable bid) – this dynamic can cause the precious metals to drop when a ‘flight to safety’ perspective would expect the metals to increase in price

[4plexowner]

At this point, ‘flight to safety’ still means ‘buy US Treasuries’ – as people buy treasuries the yield drops

Brian Bloom (Australian analyst who publishes some sound articles) points out that as the yields on the US Treasuries drop it becomes less and less attractive for foreigners to invest in the US – there are better interest rates being paid in other parts of the world

http://www.gold-eagle.com/editorials_05/bloom111507.html

Lower rates on 10 year Treasuries typically mean lower interest rates on mortgages so in the short term the dropping yields are probably a good thing for US consumers – from a macro perspective the declining yields increase the speed at which foreign money is going to leave our country

I think we will increasingly see ‘flight to safety’ include the precious metals – right now, some of the hot money (think hedge funds – 8000 of them) invested in the precious metals can be forced into selling their precious metals positions in order to cover other losses (they have to sell something that has a bid and right now none of their garbage paper has an acceptable bid) – this dynamic can cause the precious metals to drop when a ‘flight to safety’ perspective would expect the metals to increase in price

[4plexowner]

At this point, ‘flight to safety’ still means ‘buy US Treasuries’ – as people buy treasuries the yield drops

Brian Bloom (Australian analyst who publishes some sound articles) points out that as the yields on the US Treasuries drop it becomes less and less attractive for foreigners to invest in the US – there are better interest rates being paid in other parts of the world

http://www.gold-eagle.com/editorials_05/bloom111507.html

Lower rates on 10 year Treasuries typically mean lower interest rates on mortgages so in the short term the dropping yields are probably a good thing for US consumers – from a macro perspective the declining yields increase the speed at which foreign money is going to leave our country

I think we will increasingly see ‘flight to safety’ include the precious metals – right now, some of the hot money (think hedge funds – 8000 of them) invested in the precious metals can be forced into selling their precious metals positions in order to cover other losses (they have to sell something that has a bid and right now none of their garbage paper has an acceptable bid) – this dynamic can cause the precious metals to drop when a ‘flight to safety’ perspective would expect the metals to increase in price

[4plexowner]

At this point, ‘flight to safety’ still means ‘buy US Treasuries’ – as people buy treasuries the yield drops

Brian Bloom (Australian analyst who publishes some sound articles) points out that as the yields on the US Treasuries drop it becomes less and less attractive for foreigners to invest in the US – there are better interest rates being paid in other parts of the world

http://www.gold-eagle.com/editorials_05/bloom111507.html

Lower rates on 10 year Treasuries typically mean lower interest rates on mortgages so in the short term the dropping yields are probably a good thing for US consumers – from a macro perspective the declining yields increase the speed at which foreign money is going to leave our country

I think we will increasingly see ‘flight to safety’ include the precious metals – right now, some of the hot money (think hedge funds – 8000 of them) invested in the precious metals can be forced into selling their precious metals positions in order to cover other losses (they have to sell something that has a bid and right now none of their garbage paper has an acceptable bid) – this dynamic can cause the precious metals to drop when a ‘flight to safety’ perspective would expect the metals to increase in price

[Author]

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