10-Year Bond-Yield Hits Record Low Today




For better or worse the yield today on 10-Year U.S. Treasury Bonds dipped below the all-time record low.

English translation: the leading benchmark, used by the lending world to price rates like mortgage interest (among other things) briefly broke the historic record low, and as I write this post, is only trading a hair’s breath higher.

For better… because it will keep pressure off those making payments on existing adjustable rate mortgages, especially those who are underwater. And it means home cost-per-month for new Buyers will likely get a bit more affordable, thereby buoying the housing market, which in turn, lends a ray of hope to underwater homeowners looking to break even.

Gas prices and credit card rates could also come down a bit.

For worse… because it means key economic players are signaling that the “economic recovery” is moving slower than expected. Followers of this blog may wonder how it is possible that key economic players can be surprised, when modest real estate professionals saw this writing on the wall as early as December 2008.

Also for worse… because this situation, while potentially long-lasting, is completely unsustainable and only presses snooze on the eventual day of reckoning. The day may come all at once, or it may come over a decade, but make no mistake, until asset prices are allowed to de-leverage the unfounded run up we had, well… what comes up, must come down.

To make this inevitable reckoning more palatable, okay less horrendous, the Federal Reserve, politicians, institutional traders, big banks, and at this point, pretty much everyone on Main Street too… have all, one way or other, gotten with the program of kicking the can down the curb to avoid the pain.

The idea is to dilute our economic problems over time, tax payers, and as many countries as possible, so that we inflate our way out of an unprecedented mess.

That’s okay, but it would be short-sighted at best, and downright irresponsible at worst, not to make the realization here that even well-intended solutions to crisis often lead to unintended consequences. This is all pretty much a big experiment at this point, so buckle up folks, as we travel hereafter to parts unknown.

Bottom line: this is sort of short-term good news… and really bad news for the long-term hope that we are not in fact living out a “new normal”.

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