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The Business Insider ^ | 12/27/09 | Joe Weisenthal
Posted on Monday, December 28, 2009 2:48:57 PM by FromLori
Get ready for a wild ride on the long end of the curve, as the bond vigilantes go to work making Barack Obama and Tim Geithner pay for the bailout..
Bloomberg: Yields on benchmark 10-year notes will climb about 40 percent to 5.5 percent, the biggest annual increase since 1999, according to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The surge will push interest rates on 30-year fixed mortgages to 7.5 percent to 8 percent, almost the highest in a decade, Greenlaw said.
Investors are demanding higher returns on government debt, boosting rates this month by the most since January, on concern President Barack Obama’s attempt to revive economic growth with record spending will keep the deficit at $1 trillion. Rising borrowing costs risk jeopardizing a recovery from a plunge in the residential mortgage market that led to the worst global recession in six decades.
“When you take these kinds of aggressive policy actions to prevent a depression, you have to clean up after yourself,” Greenlaw said in a telephone interview. “Market signals will ultimately spur some policy action but I’m not naive enough to think it will be a very pleasant environment.”
Read the whole thing >
(Excerpt) Read more at businessinsider.com ...
TOPICS: Business/Economy; Government; News/Current Events
KEYWORDS: bailouts; interestrates
Free Republic thread
1 posted on Monday, December 28, 2009 2:48:57 PM by FromLori
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To: perchprism; LomanBill; JDoutrider; tired1; Maine Mariner; demsux; April Lexington; Marty62; ...
ping
related
http://www.bloomberg.com/apps/news?pid=20601087&sid=aiGQrHp46pc4&pos=2
2 posted on Monday, December 28, 2009 2:50:19 PM by FromLori (FromLori)
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To: FromLori
When will this happen?
3 posted on Monday, December 28, 2009 3:02:07 PM by svxdave (Life is too short to wear a fake Rolex.)
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To: FromLori
Yep. It is quite likely to happen. Without the Fed’s QE program continuing, there will be a big increase in the amount of USD-denominated paper that the market has to swallow.
More than that, at some point when the Fed wants to unwind their QE program, they have to peddle all the paper they’ve taken onto their books.
So the Fed’s QE program has a double whammy - it mis-priced debt in this year, and it will cause a huge overhang of supply going forward into the future when the Fed wants to sell their paper and unwind their various schemes.
In this situation, I don’t see any way that the yields on the long end won’t go up.
4 posted on Monday, December 28, 2009 3:03:30 PM by NVDave
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To: FromLori
Not for a while. The fed will buy treasuries to keep the rates down. FED buying will work for a while but then the 40% and higher rates will come-after we have a hyperinflation
5 posted on Monday, December 28, 2009 3:04:05 PM by Manta (Obama to issue executive order repealing laws of physics)
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To: svxdave
When you say “this” - which part of the article are you referring to?
6 posted on Monday, December 28, 2009 3:04:19 PM by NVDave
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To: Manta
The Fed has indicated (as of their last meeting) that they plan on ending their QE purchases on schedule. That means by March, they’ll be done buying RMBS. Their balance sheet indicates they’re already done or are are very close to done purchasing Treasury debt.
The Fed would have to announce a new round of QE, which would not be especially helpful to the US dollar’s strength and would likely cause the ChiComs to finally get aggressive in dealing with the Fed/Treasury.
7 posted on Monday, December 28, 2009 3:06:04 PM by NVDave
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To: FromLori
IMO this (the arrival of the so-called bond vigilantes) should have happened three-four-five years ago; it would have prevented the housing boom-then-bust had interest rates skyed, leading to low availability of loans and no insane expansion of house prices. It should have happened at any hour, any minute over the past say two years with short terms rates driven to zero. But it didn’t. Why should it happen now? (Rhetorical question on my part)
If rates really scream higher, real estate will utterly tank, which would knock the hell out of banks. I am not sure how much of that will be allowed to happen.
OTOH, I have suspended much of my always-present desire to understand the various linkages between and among interest rates, stock valutions, commodity prices, RE prices, and so on. I think we are living in a completely synthetic monetary and financial universe. The smartest guys I know have all been badly humbled, the stock market has seen by far the biggest, fastest rally in its history, and utterly *nothing* has been done to clear the rotten debt off the books of the banks or out of the Fed or FNM/FRE. It is now and continues to be a system-wide exercise in kicking the can down the road. Yet everyone is the system cannot leave the game nor cry “foul!” without drawing attention to themselves. And to top it off, there is no enforcement at all of any kind of existing law, in fact, there is an appetite to rewrite law, including the laws of physics and action-reaction in matters political, economic, and physical. So I’ve given up trying to predict the future. All I can say with certainty is that it makes me quite uneeasy to imagine where it’s headed given the present trajectory.
8 posted on Monday, December 28, 2009 3:07:35 PM by Attention Surplus Disorder (Voters who thought their ship came in with 0bama are on their own Titanic.)
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To: Manta
FED buying will work for a while but then the 40% and higher rates will come-after we have a hyperinflation
No one is going to buy bonds with yields of 5 or 6 % in a hyperinflation scenario.
9 posted on Monday, December 28, 2009 3:11:21 PM by Kozak (USA 7/4/1776 to 1/20/2009 Reqiescat in Pace)
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To: svxdave
I’m not really qualified to answer that all i could give you was my personal opinion sorry.
10 posted on Monday, December 28, 2009 3:13:18 PM by FromLori (FromLori)
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To: FromLori
Increased borrowing costs will cause more unemployment a big squeeze on consumers struggling with credit card debt. Auto loans will become very expensive and fewer cars will be sold. Leading to more unemployment and consumer misery. The middle class will suffer most and the poor can just kiss it all goodbye as Obama and company continue their relentless efforts to destroy white America and turn it into a ghost of itself (not unlike the UK where liberals have effectively dismantled the most powerful empire since Roman times). We are next as the Left continues its relentless march to world domination. Visualize 6 billion peasants and 500,000 or so global elite...
11 posted on Monday, December 28, 2009 3:15:06 PM by April Lexington (Study the constitution so you know what they are taking away!)
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To: Attention Surplus Disorder
Very true and then there is what could besst be described as monetization of the debt. I really do not see that the fed has acted in any independent manner either. They are going to have to sell $$$ coming up seeing how that fares would probably be more telling.
A Record $118 Billion In US Debt To Be Auction Off In Final Week Of The Year
http://www.businessinsider.com/a-record-118-billion-in-us-debt-to-be-auction-off-in-final-week-of-the-year-2009-12
http://www.thedailybell.com/681/Nelson-Hultberg-The-Fed-is-a-Fascist-Cartel.html
12 posted on Monday, December 28, 2009 3:19:29 PM by FromLori (FromLori)
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To: FromLori
I don’t know much and am hardly ever right when it comes to high fiance stuff. But is seems to me that eventually they are going to have to tap into the only real resource left, 401ks and IRAs. I can see them doing this one of two ways, ether allow people to with draw money with out penalty or federalize it. I hope for the first but fear the second.
13 posted on Monday, December 28, 2009 3:23:46 PM by JoSixChip (Leaning toward Sarah Palin/Allen West 2012)
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