Wednesday, May 04, 2005

Well, that's one way to get long-term interest rates up.
U.S. Treasuries maturing in five years or more fell after the government said it is considering resuming sales of 30-year bonds for the first time since 2001.

The prospect of additional supply of longer-maturity debt pushed the so-called long bond to its biggest decline in almost two months. As recently as last month Treasury officials said they had no plans to bring back the security.

``It definitely caught the market off guard,'' said Joseph Shatz, a government bond strategist at Merrill Lynch & Co. in New York and one of the 22 primary dealers of U.S government securities that are obligated to bid at the Treasury's auctions. ``I don't think anybody was prepared'' for today's announcement.
As I type the 10-year is up to 4.23%, rising over 1% today. Now this is still nothing compared to where it was in late March (~4.6%), but one has to wonder if the ultra-low ten-year yields can last with the 30-year on the way. And more importantly, what will this do to mortgage rates which tend to move in tandem with the 10-year? After all, it was late March when the 30-year FRM topped 6.0% for the first time since July 2004.

Keep your eyes peeled. The Bush administration just might flood global debt markets yet.


At 7:08 AM, Blogger Mark said...

interest rate are up in the UK to slow down house prices, but in the states there is a slump. Will higher intrest rates not slow it down further?

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