Las Vegas Nevada Interest Rates
Interest rates are up substantially from 5/27/09 because of what is happening in the bond market. I will provide an article to explain below but as many of you may not want to read something that long I will try to explain. In basic, the US Government is selling debt to other individuals and countries to fund our deficit spending which has been huge in the past 6 months. Mortgage rates are tied to the 10 year bond and the last 2 bond auctions have not gone well. Interest rates went up .5% following the 5/27 sale and yesterday, they came up .5% again as a result of increased bond yields. We're seeing 5.75 on FHA loans today vs 4.75 on 5/27.
If you are considering buying, do not wait. I don't think rates are coming back down as there is so much debt to finance. While prices are still moving, these large changes in interest rates make those prices not matter nearly so much. On a $300,000 loan, a buyer is now paying $180 more now than on 5/26/09. That's a very large change.
Please contact me if you would like me to explain or of course buy. Prices are at 2000 levels or before and we're seeing some incredible deals in the marketplace. The article is below.
June 11 (Bloomberg) -- Treasury 10-year note yields reached 4 percent for the first time since October on concern surging budget deficits and a falling dollar will prompt investors to reduce holdings of U.S. debt as issuance climbs to a record.
Treasuries tumbled 6.5 percent so far this year, the worst performance since Merrill Lynch & Co. began tracking returns in 1978, as so-called bond vigilantes drove up yields to punish President Barack Obama for quadrupling the budget shortfall to $1.85 trillion and raising the risk of inflation.
“People are increasingly concerned about supply,” said Jay Mueller, who manages about $3 billion of bonds at Wells Fargo Capital Management in Milwaukee. “The government running a deficit of 12 or 13 percent is not something we’ve seen since World War II. It’s very hard to digest.”
The yield on the 10-year note was little changed at 3.972 percent, after climbing as high as 4.0038 percent, at 9:05 a.m. in New York, according to BGCantor Market Data. The yield last touched 4 percent on Oct. 16. The 3.125 percent security maturing in May 2019 rose 1/32, or 31 cents per $1,000 face amount, to 93 9/32.
The 30-year bond yield touched 4.8391 percent, the highest since October 2007. The government is scheduled to sell $11 billion of the securities today.
The Standard & Poor’s 500 Index fell 0.4 percent yesterday on concern higher interest rates and accelerating inflation will threaten an economic recovery. Stock futures declined today.
Borrowing Costs
The rise in yields is undermining Federal Reserve Chairman Ben S. Bernanke’s efforts to cap consumer borrowing costs and pull the economy out of the worst recession in five decades.
Ten-year yields have risen about 143 basis points since the Fed announced its $300 billion, six-month Treasury purchase program on March 18. Thirty-year fixed-rate mortgages jumped to 5.74 percent from as low as 4.85 percent in April, according to Bankrate.com in North Palm Beach, Florida.
Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds rose to 5.06 percent yesterday. That’s the highest since Nov. 24, the day before the U.S. central bank announced its plans to buy home-loan bonds, and up from 3.94 percent on May 20.
Treasuries pared losses after the 10-year note yield reached 4 percent, as the highest yields on seven months lured back some investors.
“Four percent’s going to be seen as a very good entry point,” said George Goncalves, chief fixed-income rates strategist at Cantor Fitzgerald LP, one of 16 primary dealers that trade with the Federal Reserve. “It’s proving to be a good spot to draw out value players.”
Thirty-Year Auction
Thirty-year bonds drew a yield of 4.288 percent at the previous auction of the securities on May 7. Investors bid for 2.14 times the amount of debt for sale last month, versus an average of 2.21 times for the past 10 auctions. The sale is the third auction this week as the Treasury raises $65 billion.
The Treasury’s auction of $19 billion in 10-year notes yesterday drew a yield of 3.99 percent, the highest since August 2008. The sale was the second of three sales this week that will raise $65 billion. It was a reopening of the record $22 billion 10-year note sale on May 6, which drew a yield of 3.19 percent.
Indirect bidders, the class of investors that includes foreign central banks, bought 34.2 percent of the notes, up from 31.9 percent in May. The average at the past 10 scheduled auctions is 25.8 percent.
Russia’s central bank may switch some of its reserves from Treasuries to International Monetary Fund bonds, the bank’s first deputy chairman, Alexei Ulyukayev, said in Moscow yesterday. His comments were confirmed by a bank official who declined to be named, citing bank policy.
BRIC Demand
Finance Minister Alexei Kudrin said last month Russia will buy $10 billion of IMF bonds. China is “actively” considering buying as much as $50 billion of the IMF bonds, the State Administration of Foreign Exchange said last week. Brazil’s Finance Minister Guido Mantega said yesterday his country will purchase $10 billion of debt sold by the IMF.
Russia holds $138.4 billion of U.S. debt. China is the largest U.S. creditor, with $767.9 billion. The U.S. government must rely on foreign investors to sustain record borrowing.
China’s State Administration of Foreign Exchange said last week that it’s “actively” considering buying as much as $50 billion of the IMF bonds. India may buy IMF bonds worth as much as $10 billion using part of its reserves, India’s Financial Express newspaper reported in April.
Foreign Reserves
While leaders of the nations of Brazil, Russia, India and China talk about substituting the dollar, the so-called BRIC countries have increased foreign reserves at the fastest pace since September. The nations added more than $60 billion in foreign reserves in May to limit currency gains, data compiled by central banks and strategists show.
The Dollar Index, used by the ICE to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell 0.34 percent to 80.04 yesterday.
Many of those reserves are still being plowed into U.S. debt securities, according to data from the Fed. Its holdings of Treasuries on behalf of central banks and institutions from China to Norway rose by $68.8 billion, or 3.7 percent, in May, the third most on record, data compiled by Bloomberg show.
The Treasury said bidding from foreigners was above average at its $35 billion three-year note auction two days ago. The sale drew bids for 2.82 times the amount of debt available, rising from 2.66 in May. Investors bought the notes after yields rose more than 50 basis points in less than a week.
Budget Deficit
Longer maturities are leading losses in the Treasury market in 2009, indicating investors are demanding more yield because of the threat inflation will quicken in coming years.
Thirty-year bonds handed investors a 29 percent loss this year, versus 12 percent for 10-year notes and 0.5 percent for two-year securities, according to Merrill Lynch index data.
Yields are also rising as the economy shows signs of recovering. A report today showed sales at U.S. retailers rose in May for the first time in three months. Purchases climbed 0.5 percent, as forecast, after a revised 0.2 percent drop in April that was smaller than first reported, the Commerce Department said in Washington.
The U.S. budget deficit climbed to $189.7 billion in May, a record for the month, compared with $165.9 billion a year earlier, the Treasury said yesterday in Washington.
Loss of Faith
The U.S. may borrow $3.25 trillion in the fiscal year ending Sept. 30, almost four times the $892 billion in 2008, according to primary dealer Goldman Sachs Group Inc. The budget deficit is projected to increase to $1.85 trillion in the year ending Sept. 30, equivalent to 13 percent of the nation’s economy, according to the nonpartisan Congressional Budget Office.
All told, the government and the central bank have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.
For the moment, at least, inflation isn’t a cause for concern. During the past 12 months, consumer prices fell 0.7 percent, the biggest decline since 1955. Excluding food and energy, prices climbed 1.9 percent from April 2008, according to the Labor Department.
The difference between rates on 10-year notes and Treasury Inflation Protected Securities, which reflects the outlook among traders for consumer prices, reached 2.13 percentage points yesterday, a 10-month high.
“The market’s lost faith in the ability of the Fed to control interest rates here,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. |
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