Treasury Price Bubble???

[DWCAP]

http://www.signonsandiego.com/uniontrib/20080206/news_1b6treasury.html

I noticed this in todays UT. I dont know if it has been posted up here yet, but I havnt seen it.

In reading the article it seemed dangerous for real estate if it is true. If 10/yr yeilds went back up to 5-6% as they were at the beginning of 2007, it could be disasterous (or good, IF you are chearing a terrible RE fall). Imagine what would happen to housing if interest rates were between 7-9% (5-6% 10yr + 2-2.5% markup)

I do have to say that I have been suprised how many people are buying treasuries when better returns are available in European or Asian bonds. The Fed has stopped worring about inflation completly, and they are willing to take 3.5%/yr when inflation is running atleast that high? I guess it is still better than the losses you would have taken sitting in countrywide or other banking/RE investment services, but I doubt many traders would keep their jobs let alone make huge bonus’s on “Well, we only lost……”
I dont think high interest rates (>15%)are coming back, but even a return to where we were before the subprime crash could be a killer, gov boosts or not. Am I wrong?

[Duck]

I’ll follow the advice of the Pimco guy at the end of the story. They are the authority on bonds and have said since last spring that the Fed Funds rate was headed towards 3% or lower. The Fed and Washington DC in general are all over housing right now and will do whatever it takes to keep mortgage rates low until the majority of subprime mortgages get refi’d or froze and the inventory overhang of new homes gets worked through the system. The easiest solution is low mortgage rates. It might take another 2 or 3 years, but you can be sure this is the #1 economic concern and despite the overall incompetency of our government, when they set their minds to solving a single problem without partisanship, it usually gets done.

[Duck]

I’ll follow the advice of the Pimco guy at the end of the story. They are the authority on bonds and have said since last spring that the Fed Funds rate was headed towards 3% or lower. The Fed and Washington DC in general are all over housing right now and will do whatever it takes to keep mortgage rates low until the majority of subprime mortgages get refi’d or froze and the inventory overhang of new homes gets worked through the system. The easiest solution is low mortgage rates. It might take another 2 or 3 years, but you can be sure this is the #1 economic concern and despite the overall incompetency of our government, when they set their minds to solving a single problem without partisanship, it usually gets done.

[Duck]

I’ll follow the advice of the Pimco guy at the end of the story. They are the authority on bonds and have said since last spring that the Fed Funds rate was headed towards 3% or lower. The Fed and Washington DC in general are all over housing right now and will do whatever it takes to keep mortgage rates low until the majority of subprime mortgages get refi’d or froze and the inventory overhang of new homes gets worked through the system. The easiest solution is low mortgage rates. It might take another 2 or 3 years, but you can be sure this is the #1 economic concern and despite the overall incompetency of our government, when they set their minds to solving a single problem without partisanship, it usually gets done.

[Duck]

I’ll follow the advice of the Pimco guy at the end of the story. They are the authority on bonds and have said since last spring that the Fed Funds rate was headed towards 3% or lower. The Fed and Washington DC in general are all over housing right now and will do whatever it takes to keep mortgage rates low until the majority of subprime mortgages get refi’d or froze and the inventory overhang of new homes gets worked through the system. The easiest solution is low mortgage rates. It might take another 2 or 3 years, but you can be sure this is the #1 economic concern and despite the overall incompetency of our government, when they set their minds to solving a single problem without partisanship, it usually gets done.

[Duck]

I’ll follow the advice of the Pimco guy at the end of the story. They are the authority on bonds and have said since last spring that the Fed Funds rate was headed towards 3% or lower. The Fed and Washington DC in general are all over housing right now and will do whatever it takes to keep mortgage rates low until the majority of subprime mortgages get refi’d or froze and the inventory overhang of new homes gets worked through the system. The easiest solution is low mortgage rates. It might take another 2 or 3 years, but you can be sure this is the #1 economic concern and despite the overall incompetency of our government, when they set their minds to solving a single problem without partisanship, it usually gets done.

[DWCAP]

Duck,
Actually I agree with you. I dont think the Gov is gonna let this one get away. If they think people vote with their checkbooks, just wait till the middle class starts loosing houses in mass numbers.
I actually posted this thinking there would be more of a response. PIMCO may be right, but stories like this tend to get people talking and even small changes in perception can move markets.
I really think the FED is gonna squash rates until housing heals, the question is, what kinda price do we pay 3-5 or maybe even 10 years from now? Inflation builds, returns are worse, rates are raised, and housing is hurting again. A return to the 6.5% rates we were paying 1 year ago would be a knife in the heart, so how are we ever gonna get outa this mess? Remember inflation only really counts if it is wage inflation, and we havnt been seein too much of that lately.

[DWCAP]

Duck,
Actually I agree with you. I dont think the Gov is gonna let this one get away. If they think people vote with their checkbooks, just wait till the middle class starts loosing houses in mass numbers.
I actually posted this thinking there would be more of a response. PIMCO may be right, but stories like this tend to get people talking and even small changes in perception can move markets.
I really think the FED is gonna squash rates until housing heals, the question is, what kinda price do we pay 3-5 or maybe even 10 years from now? Inflation builds, returns are worse, rates are raised, and housing is hurting again. A return to the 6.5% rates we were paying 1 year ago would be a knife in the heart, so how are we ever gonna get outa this mess? Remember inflation only really counts if it is wage inflation, and we havnt been seein too much of that lately.

[DWCAP]

Duck,
Actually I agree with you. I dont think the Gov is gonna let this one get away. If they think people vote with their checkbooks, just wait till the middle class starts loosing houses in mass numbers.
I actually posted this thinking there would be more of a response. PIMCO may be right, but stories like this tend to get people talking and even small changes in perception can move markets.
I really think the FED is gonna squash rates until housing heals, the question is, what kinda price do we pay 3-5 or maybe even 10 years from now? Inflation builds, returns are worse, rates are raised, and housing is hurting again. A return to the 6.5% rates we were paying 1 year ago would be a knife in the heart, so how are we ever gonna get outa this mess? Remember inflation only really counts if it is wage inflation, and we havnt been seein too much of that lately.

[DWCAP]

Duck,
Actually I agree with you. I dont think the Gov is gonna let this one get away. If they think people vote with their checkbooks, just wait till the middle class starts loosing houses in mass numbers.
I actually posted this thinking there would be more of a response. PIMCO may be right, but stories like this tend to get people talking and even small changes in perception can move markets.
I really think the FED is gonna squash rates until housing heals, the question is, what kinda price do we pay 3-5 or maybe even 10 years from now? Inflation builds, returns are worse, rates are raised, and housing is hurting again. A return to the 6.5% rates we were paying 1 year ago would be a knife in the heart, so how are we ever gonna get outa this mess? Remember inflation only really counts if it is wage inflation, and we havnt been seein too much of that lately.

[DWCAP]

Duck,
Actually I agree with you. I dont think the Gov is gonna let this one get away. If they think people vote with their checkbooks, just wait till the middle class starts loosing houses in mass numbers.
I actually posted this thinking there would be more of a response. PIMCO may be right, but stories like this tend to get people talking and even small changes in perception can move markets.
I really think the FED is gonna squash rates until housing heals, the question is, what kinda price do we pay 3-5 or maybe even 10 years from now? Inflation builds, returns are worse, rates are raised, and housing is hurting again. A return to the 6.5% rates we were paying 1 year ago would be a knife in the heart, so how are we ever gonna get outa this mess? Remember inflation only really counts if it is wage inflation, and we havnt been seein too much of that lately.

[capeman]

You guys have to realize that the Fed. and Gov’t don’t set interest rates especially mortgage rates. Those are based on the bond market (10 yr) and if the bond market doesn’t like what the Fed is doing and treasuries rise then the Fed loses it’s power. Liquidity is being thrown into the market as commercial credit is drying up. If that locks then the bond rates explode as will mortgage rates. We could very well be close to that point right now.

[capeman]

You guys have to realize that the Fed. and Gov’t don’t set interest rates especially mortgage rates. Those are based on the bond market (10 yr) and if the bond market doesn’t like what the Fed is doing and treasuries rise then the Fed loses it’s power. Liquidity is being thrown into the market as commercial credit is drying up. If that locks then the bond rates explode as will mortgage rates. We could very well be close to that point right now.

[capeman]

You guys have to realize that the Fed. and Gov’t don’t set interest rates especially mortgage rates. Those are based on the bond market (10 yr) and if the bond market doesn’t like what the Fed is doing and treasuries rise then the Fed loses it’s power. Liquidity is being thrown into the market as commercial credit is drying up. If that locks then the bond rates explode as will mortgage rates. We could very well be close to that point right now.

[capeman]

You guys have to realize that the Fed. and Gov’t don’t set interest rates especially mortgage rates. Those are based on the bond market (10 yr) and if the bond market doesn’t like what the Fed is doing and treasuries rise then the Fed loses it’s power. Liquidity is being thrown into the market as commercial credit is drying up. If that locks then the bond rates explode as will mortgage rates. We could very well be close to that point right now.

[Author]

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