10 Year bonds about to pass 3%

Yahoo Finance ^ | Dec 25, 2013 | Vince Ferrer

[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.

[Paulie]

Maybe it will be the straw that breaks the camel's back, but saving rates back in the neighborhood of 5% and other rates back to average historical levels would be a good thing, imo.

[AlmaKing]

Glad I just closed last Friday on a house at 3.5%.

[Vince Ferrer]

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.

[Vince Ferrer]

Glad I just closed last Friday on a house at 3.5%.

Just remember, an increasing interest rate will not affect your payments, but it will affect the resale value of the home.

[montanajoe]

Interest on a 30 year mortgage should be at least 6.0%. I don't worry about the hype pushed by the professional doom and gloomers, but it seems to me folks should have their budgets calibrated to that rate for the next several years....

[VerySadAmerican]

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?

[Bloody Sam Roberts]

True. I think we'll be in deep doo doo if it gets to 4.

That which we have been warned about for the last 3 years is coming very soon.

[Vince Ferrer]

Today they made it to 3%. The world isn’t going to end tomorrow, but expect more people to start noticing.