Wednesday, December 8, 2010

Have bonds peaked? Mortgage rises on the way

Global bond rout deepens on US fiscal worries

The yield on 10-year Treasuries – the benchmark price of money worldwide and the key driver of US mortgages rates – has rocketed to 3.3pc, up 35 basis points since the announcement of a fresh fiscal stimulus package. This dramatic rise in yields threatens to short-circuit any benefits of stimulus. The bond rout raises concerns that the US authorities may be losing control over events. The Treasury sell-off has ricocheted through the global system, triggering bond sell-offs in Asia, Europe and Latin America. The rise in yields risks becoming a textbook case of a central bank losing control over long-term rates. "Nobody believes that we're slipping into deflation anymore. That phase has passed."

Posted by drewster @ 08:23 PM (882 views)
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3 thoughts on “Have bonds peaked? Mortgage rises on the way

  • Oh oh oh…looks like QE3 is on the cards.

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  • The US ‘fiscal stimulus’ is an extension of Mad King George’s tax cuts for the rich. This won’t stimulate the economy since those people won’t consume more or invest in productive assets, they’ll just buy more bonds and/or transfer it abroad in the carry trade and precipitate more currency volatility. It just gives the rich more means to load down the economy with debt. Then the Republicans will later increase taxes on the middle class to ‘save the dollar’..

    The tax cut for the average worker is the reduction in social security contributions. Given the moves towards reducing social security payouts and handing over the system to Wall Street, this reduction will simply hasten the time when the system, funded entirely by these contributions, will become ‘unaffordable’ and will have to be restructured along privatised lines.

    This weakening of the safety net for individuals goes hand-in-hand with the strengthening of that net for corporations – miltary-industrial complex, subsidies for big agriculture, bank bailouts, public purchase of overpriced drugs from big drug companies, special benefits to oil and gas and giveaways of national resources (low royalties from mining companies, free spectrum for broadcasters etc.) If they cut these kinds of benefits and stopped the special treatment for capital gains and dividends it wouldn’t take long to slash the deficit.

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  • mark wadsworth says:

    Icarus, that’s a good list in yoru last paragraph. As I always like to say, Land Value Tax will sort them out.

    Remember that ag subsidies are the opposite of LVT, banks are the ultimate Home-Owner-Ists, they need steadily high and rising land prices (and I am minded to have a flat tax of 2% on bank assets to the extent they are mortgages secured on land), oil and gas mining rights are a special kind of land value, so slap a tax on that as well (aka drilling licences, one of the few good taxes the UK government ever imposed), radio spectrum is another kind of land value (again, G Brown actually did something right with the 3G auctions, which is a special kind of LVT) and so on.

    Deficit? What deficit?

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