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Is this it? Did the American government just demonstrate that the only thing Republicans and Democrats can agree upon is to worsen our fiscal position, and did investors in Treasuries finally take note? Does this represent the beginnings of an external constraint upon American borrowing, such that very soon American politicians will no longer be able to offer their constituents pain-free choices financed by public debt?
Or is this just a flash in the pan -- one more cry of "wolf" about bond vigilantes?
Had stocks spiked upward at the same time that bond yields rose, it would be easier to believe that this is just about upbeat assessments of the stimulative impact of the tax cuts. I'm pretty sure this is about the deficit.
I am really wondering if this is the turning point, and if the compromise between Congressional Republicans and the President has demonstrated that America lacks the political capacity to deal with its debt.
Bond Market Bloodbath Deepens
Global Bond Rout Deepens on US Fiscal Worries
Personal note: My wife and I decided to buy a primary residence, and locked in a fixed rate 30-year mortgage in mid-October. I believe that real house prices will drop further, but I also think this was my best near-term entry point as far as mortgage rates go. Since we would have had to borrow a substantial amount of money to buy a house, even if real prices dropped a lot, we decided to pull the trigger while it was possible to finance on good terms. We're getting a much better house than the one we currently rent, and the fixed payment (principal + interest) is the same as our rent; net of taxes, maintenance, and equity we'll be coming out ahead. The other consideration is that the housing payment is less than a quarter of take-home income (without my wife working), so there is security in fixing our housing costs at a level that can be sustained on one income. We've avoided the "two income trap", and when she returns to work, we'll have redundancy. That said, I salute those renting iTulipers who are holding out for a better price level. I often exit a winning position earlier than optimal, and I wish you all the best.
Or is this just a flash in the pan -- one more cry of "wolf" about bond vigilantes?
Had stocks spiked upward at the same time that bond yields rose, it would be easier to believe that this is just about upbeat assessments of the stimulative impact of the tax cuts. I'm pretty sure this is about the deficit.
I am really wondering if this is the turning point, and if the compromise between Congressional Republicans and the President has demonstrated that America lacks the political capacity to deal with its debt.
Bond Market Bloodbath Deepens
Treasury yields have surged this week, following a weak jobs report and news of a tax deal that will add to the deficit. Yields have been rising in Europe as well – even in austere Germany -- as the debt crisis ravaging Greece, Ireland, Portugal and Spain gathers steam.
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The yield on the 10-year Treasury note hit 3.27%, which puts it up more than 75 basis points, or hundredths of a percentage point, since it bottomed out in October's rush to buy bonds ahead of the Fed.
Yields on German 10-year bonds have surged to six-month highs this week as well, amid questions about how the euro zone might resolve its galloping financial contagion.
...
The yield on the 10-year Treasury note hit 3.27%, which puts it up more than 75 basis points, or hundredths of a percentage point, since it bottomed out in October's rush to buy bonds ahead of the Fed.
Yields on German 10-year bonds have surged to six-month highs this week as well, amid questions about how the euro zone might resolve its galloping financial contagion.
Global Bond Rout Deepens on US Fiscal Worries
The yield on 10-year Treasuries – the benchmark price of money worldwide and the key driver of US mortgages rates – has rocketed to 3.3pc, up 35 basis points since President Barack Obama agreed on Monday to compromise with Senate Republicans on tax cuts.
The Treasury sell-off has ricocheted through the global system, triggering bond sell-offs in Asia, Europe and Latin America. Japan's finance ministry braced as borrowing costs on seven-year debt jumped by a sixth in one trading session, while German Bunds punched through 3pc.
...
The US tax deal adds $1 trillion of stimulus over two years, according to BNP Paribas. America's budget deficit will remain stuck near 10pc of GDP, not just in 2011 but also in 2012. This will push gross public debt to 110pc of GDP under the IMF definition, near the brink of a debt compound spiral. The contrast with fiscal tightening in Europe has become starkly evident.
...
The standard rate for 30-year mortgages in US has moved up in tandem with Treasury yields. The rate has been creeping up ever since the US Federal Reserve first signalled plans for a fresh blast of quantitative easing, rising 85 basis points in three months.
The Treasury sell-off has ricocheted through the global system, triggering bond sell-offs in Asia, Europe and Latin America. Japan's finance ministry braced as borrowing costs on seven-year debt jumped by a sixth in one trading session, while German Bunds punched through 3pc.
...
The US tax deal adds $1 trillion of stimulus over two years, according to BNP Paribas. America's budget deficit will remain stuck near 10pc of GDP, not just in 2011 but also in 2012. This will push gross public debt to 110pc of GDP under the IMF definition, near the brink of a debt compound spiral. The contrast with fiscal tightening in Europe has become starkly evident.
...
The standard rate for 30-year mortgages in US has moved up in tandem with Treasury yields. The rate has been creeping up ever since the US Federal Reserve first signalled plans for a fresh blast of quantitative easing, rising 85 basis points in three months.
Personal note: My wife and I decided to buy a primary residence, and locked in a fixed rate 30-year mortgage in mid-October. I believe that real house prices will drop further, but I also think this was my best near-term entry point as far as mortgage rates go. Since we would have had to borrow a substantial amount of money to buy a house, even if real prices dropped a lot, we decided to pull the trigger while it was possible to finance on good terms. We're getting a much better house than the one we currently rent, and the fixed payment (principal + interest) is the same as our rent; net of taxes, maintenance, and equity we'll be coming out ahead. The other consideration is that the housing payment is less than a quarter of take-home income (without my wife working), so there is security in fixing our housing costs at a level that can be sustained on one income. We've avoided the "two income trap", and when she returns to work, we'll have redundancy. That said, I salute those renting iTulipers who are holding out for a better price level. I often exit a winning position earlier than optimal, and I wish you all the best.
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