Use access key #2 to skip to page content.

Interest rates going up...



June 13, 2008 – Comments (7)

I have stated my expectations that interest rates would be going up for 6-8 months.  The fed reduced rates, but that has not affected consumer mortgage rates, for example, they hardly dipped below 6% and and are now at 6.32%.

Treasury yields are up more...

Mortgage rates doubling would not surprise me. 

7 Comments – Post Your Own

#1) On June 13, 2008 at 6:56 AM, alstry (< 20) wrote:

What a lot of peoople don't factor into rates is the default risk....and right now that is skyrocketing.  As a result lender will have to charge much higher rates simply to compensate for defaults.

Report this comment
#2) On June 13, 2008 at 7:53 AM, mandrake66 (79.54) wrote:

I think the Fed will have to raise rates just to keep pace with the market. The two-year is the issue that is supposedly most sensitive to Fed rate cuts, but it has been rising sharply, while long-term rates have been mostly steady. This is why companies like Annaly (NLY), which play the yield curve and want it to be steep, have been getting hurt the last week.

Report this comment
#3) On June 13, 2008 at 8:36 AM, mandrake66 (79.54) wrote:

Here's another tidbit I found by following Yves Smith's links, showing why Bernanke may be forced to raise by the ECB:

Recall that just last week, Bernanke sent clear signals that rising near-term inflation expectations effectively put an end to the Fed’s rate cutting. But Bernanke’s concerns were quickly overtaken by events in two separate directions at the end of the week. First, on Thursday European Central Bank President Jean-Claude Trichet surprised markets by suggesting that the ECB’s next move might be a rate increase, as early as next month. Trichet’s comments were a slap in the face to traders betting that the interest rate differential between the US and Europe would narrow; instead, it looked like the opposite would happen, and markets needed to adjust accordingly. Dollar down, oil up – neither of which the Fed wanted to see. But this was only a prelude to Friday’s debacle that followed the release of the May employment report.

Report this comment
#4) On June 13, 2008 at 9:15 AM, dwot (29.15) wrote:

mandrake I saw that Europe was breaking ranks with the US and holding on their interest rate or increasing. 

The US simply gave away much of its power by allowing its corporations to export many of its jobs and business infrastructure investment.   And the consequences of slaughtering people's lifestyles and wages is that we have an economy that you could descibe as having an ever increasing population that's prospect aren't much different than serf populations.

People are the backbone of the economy, and they need to make a decent wage relative to the costs.  The US exported much of the people's bargining power.

Report this comment
#5) On June 13, 2008 at 9:19 AM, dwot (29.15) wrote:

alstry, for sure the price of risk wasn't factored in.  There probably needed to be at least an extra 200 basis point spread through the years of reduced spread.  The credit bubble never could have gotten out of control to the degree that it has with proper risk built into the rates.  There still would have been trouble with the degree that rates were artificially lowered.

Report this comment
#6) On June 13, 2008 at 9:30 AM, joshnix2 (< 20) wrote:

I was in grade school but wasn't there a very high mortgage rate during the 80's? Then in the 90's the rates started dropping?

Report this comment
#7) On June 13, 2008 at 6:23 PM, dwot (29.15) wrote:

joshnix, yes, I was working in banking and I remember some mortgage rates being in the low 20%.

Report this comment

Featured Broker Partners