Skip to comments.10 Year bonds about to pass 3%
Posted on 12/25/2013 9:45:54 PM PST by Vince Ferrer
The interest on 10 year bonds is approaching 3%. The last time it did that was during the expectations of the Fed tapering. Now that it has announced that it will begin tapering, the rate has steadily gone up.
Interest rates have been falling since 1983, and this has driven a lot of debt buying, from the housing bubble to the federal government's uncontrolled spending. Consumers won if they bought a house, because when the interest rates dropped, it gave a boost to their equities. Governments would issue bonds, knowing that they could refinance them cheaper later.
However, it hasn't been all good. Pension plans and elderly, who depend on fixed income, saw their opportunities for getting reasonable returns diminish. Pension plans are now severely underfunded.
Now that interest rates are going up, the situation reverses. Home equity will drop as interest rates rise. Governments cannot refinance cheaper, but must pay more after a new bond issue. The percentage of taxes going to service debt will increase and crowd out spending on other things, like entitlements. But pensions may be able to recover.
(Excerpt) Read more at finance.yahoo.com ...
Glad I just closed last Friday on a house at 3.5%.
If we get to 5%, the federal debt will be the top issue, as it will start crowding out other spending. The arguments we have seen so far over the debt limit and spending will be nothing.
Just remember, an increasing interest rate will not affect your payments, but it will affect the resale value of the home.
Did you get 3.5 per cent on a thirty year fixed loan? If so, how many points did you have to pay. And wasn’t it harder to qualify under Dodd/Frank?
That which we have been warned about for the last 3 years is coming very soon.
Today they made it to 3%. The world isn’t going to end tomorrow, but expect more people to start noticing.