Jump to content
House Price Crash Forum
Sign in to follow this  
karhu

Treasuries Buckle, Record Home Sales Baffle Bulls

Recommended Posts

NEW YORK, Nov 29 (Reuters) - U.S. Treasury debt prices fell sharply on Tuesday after record new home sales suggested the Federal Reserve had room to continue raising interest rates.

The market had rallied on Monday for the opposite reason when data on existing home sales fell more than expected, stoking speculation of a slowing housing sector.

http://today.reuters.com/investing/finance...DS-UPDATE-3.XML

Sales of new U.S. homes unexpectedly shot up 13 percent in October, the biggest increase since April 1993, taking sales to a record annual rate of 1.42 million units from an upwardly revised 1.26 million in September.

"Some cooling seems likely going forward, but declarations of a collapse in the housing sector are premature," said Michelle Girard, analyst at RBS Greenwich Capital.

Edited by karhu

Share this post


Link to post
Share on other sites
Treasuries Buckle, Record Home Sales Baffle Bulls, Anyone understand this?

It's pretty logical. The record home sales figure is more evidence that the American consumer is not being hurt by 4% interest rates (combined with strong consumer spending figures), suggesting that the Fed can continue to raise rates without hurting economic growth. Seeing as the yield on short-term Treasury debt is less than 4% (ie the cash rate), people are selling Treasuries and going cash. Hence Treasury prices falling.

Share this post


Link to post
Share on other sites

It's pretty logical. The record home sales figure is more evidence that the American consumer is not being hurt by 4% interest rates (combined with strong consumer spending figures), suggesting that the Fed can continue to raise rates without hurting economic growth. Seeing as the yield on short-term Treasury debt is less than 4% (ie the cash rate), people are selling Treasuries and going cash. Hence Treasury prices falling.

IPOD, that's what I thought too. However, the FED seemed to be indicating that they'd almost finished raising IRs last week. This new data seems to indicate that thay haven't reached 'neutral' rates in the US yet, and could put yet more pressure on the £.

The MPC has to act soon, doesn't it?

Edited by karhu

Share this post


Link to post
Share on other sites
the FED seemed to be indicating that they'd almost finished raising IRs last week.

I think that's an overstatement of what they actually said.

http://news.bbc.co.uk/2/hi/business/4461476.stm

The US Federal Reserve could soon consider an end to its current cycle of "measured" interest rate rises, minutes of its latest meeting have suggested.

the minutes showed some members had voiced fears that "risks of going too far" could eventually emerge.

Despite hints that the FOMC could change its stance, analysts still expect rates to rise at the Fed's next meeting in December, with another possible rise in January.

Note all the 'mights' and 'may's and 'could's in the Fed's statement. They are saying that rate rises now are not a foregone conclusion, but depend more on economic conditions, that's all.

The MPC has to act soon, doesn't it?

I think raising rates to 4.75% so soon after cutting them would give Mervyn King a serious case of "egg-on-face" disease and he would face a withering barrage of criticism from the CBI, retailers, etc. The safest option is to hold for the forseeable future. I think the cut was the wrong thing to do, as unfortunately it has shown business that the Bank will give in to their demands if they shout loud enough and stamp their feet and throw their toys out of the pram.

Share this post


Link to post
Share on other sites

I think that's an overstatement of what they actually said.

http://news.bbc.co.uk/2/hi/business/4461476.stm

Note all the 'mights' and 'may's and 'could's in the Fed's statement. They are saying that rate rises now are not a foregone conclusion, but depend more on economic conditions, that's all.

I think raising rates to 4.75% so soon after cutting them would give Mervyn King a serious case of "egg-on-face" disease and he would face a withering barrage of criticism from the CBI, retailers, etc. The safest option is to hold for the forseeable future. I think the cut was the wrong thing to do, as unfortunately it has shown business that the Bank will give in to their demands if they shout loud enough and stamp their feet and throw their toys out of the pram.

I'm not sure Mervyn should have egg on his face. I don't think he was pushing to lower rates. It was the other muppets on the MPC and in particular those selected by Gordon Brown!!!

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 336 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.