Wednesday, April 14, 2010

30 Year IR down trend is about to turn

Interest Rates Have Nowhere to Go but Up

Nice piece by the NY Times on why IR will go up. Can't be much different in the UK. "Each increase of 1 percentage point in rates adds as much as 19 percent to the total cost of a home, according to Mr. Mayer. "

Posted by mountain goat @ 12:34 PM (1565 views)
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9 thoughts on “30 Year IR down trend is about to turn

  • Hi MG, (off topic)

    Been busy smarting from the shorts going belly up :-). Well its not been that bad, am actually quite pleased re the FTSE, as actually nearly went long…. but not quite. A couple of S&P nibbles but no real damage done as ESTrader was right- new highs… since March 09, but am STILL looking for a top formation. As for the currencies a bit more success there as i think we discussed the $ has suffered a pullback. For GBP anywhere from here to just under 1.58 looks like the retracement level.

    Have actually just been really busy, so have not posted. Hope things are good for you. Am desperately seeking the high now :-). Am not at all surprised as always said that the retracement would probably be longer and bigger than imagined by most people… turns out that includes me!

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  • Both the FED & ECB indicated last week that rates are destined to rise sooner than many anticipate and as a consequence I cant see how the BOE can continue to keep rates artificially low even in the short term. UK house prices surely then must start falling back (gravity defied no more)

    techie – I’m anticipating a rise in the FTSE 100 index to 6100-6300 in the run up to polling day – what do you think?

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  • mountain goat says:

    Hi TM, welcome back! Depressing times for bears indeed, but that in itself means we are probably near a top (at least that’s what I keep telling myself!) I think it is the cost of money that is going to strangle this rally in the end as the liquidity fountain is tightened and IR rise on Gov bonds. Government debt will suck all capital out of the markets. Why risk investing anywhere else when you can get 15%+ on US Treasuries?

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  • “Government debt will suck all capital out of the markets.”
    – Bingo …House!

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  • paranoia blue says:

    TM @ 1
    They can only suck shorts, for so long! Hold in there, mate, it is going to be some cliff-drop experience… best watch from a distance, with appropriate financial failsafe positions. ATB

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  • Erm…..there’s not much further to possibly fall…..or am I being daft?

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  • Welcome back TM, wondered what had happened to you.

    Been to busy myself for the markets over the last few weeks.

    Maybe sell in May and go away will be the case this year. 2nd year of US Presidency and all that.

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  • Hey Jack, STR, PB and MG.

    i will try to deal:
    1. Jack @ 2 – as you know my interest in looking for the top of the retracement is, in part, to do with the fact i think there is correlation between this and HP. I do think we are near another (interim at least) top. I called the 5600 “top” of the retracement back from March 09 which as you know itself retraced to around 5100. If we have a move now to around 5900 then I would be looking for another (interim at least) top. There could be one more move up after (maybe as a blow off to your levels)that but i agree with MG and PB…. I THINK we are close.

    2. As i said since i tried to sell some when it got back close to the 5600 level (and took a pretty small loss), i have left the FTSE alone, for the very reasons you state. As well a watching brief sounds right for the election. I also tried to sell the dax and took a slightly bigger hit, but nothing silly.

    3. Sell in May and go away.. yes STR but that just would fit “too well”.

    4. PB yes but how close, is the squillion dollar question? ATB to you too.

    5. The Dollar looks to have completed the first leg of its bull move, how the retracement of that pans out will, i think, be instructive.

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  • mark wadsworth says:

    “Each increase of 1 percentage point in rates adds as much as 19 percent to the total cost of a home”

    Not if you’re a tenant! And if you’ve saved a deposit and are waiting to buy, then interest rate hikes don’t affect you one bit as house prices will fall to compensate.

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