Interesting aspect of the so called market stabilization that has occurred recently (apart from the tax payer/s underpinning the whole global economy) is that despite the Federal Reserve pumping money (buying Mortgage back securities and US treasuries) into the US economy to stabilize mortgage rates. Rates are actually moving upward as bond demand falls, particularly demand for US debt. So the the poor home owner is getting screwed between fixing a mortgage rate or shifting from a variable (floating rate) rate. Either way if the Fed (who obviously is going to lose control of surging bond yields), can't hold down mortgage rates. An ongoing spike in mortgage rates will continue. Which could lead to a new wave of foreclosures.
"NEW YORK (Reuters) - The global financial crisis may morph into a second, equally virulent phase where borrowing costs rise again, hobbling an embryonic economic recovery, debilitating cash-strapped banks, and punishing investors all over again.
Early warnings signs of this scenario include surging government bond yields, a slumping U.S. dollar, and the fading of the bear market rally in U.S. stocks."
Rising U.S. bond yields may spark Credit Crisis IIU.S. mortgage rate rise threatens housing recovery (Reuters)
No comments:
Post a Comment