Wednesday, June 01, 2005

The Glut family made it back to the US safe and sound yesterday. British Airways was excellent as always, and thanks to their fine movie selection I finally had a chance to see Hotel Rwanda. Incredibly moving and well acted.

I hadn't planned on posting today, but this news drove me from my unpacking.
Ten-year US Treasury yields fell to their lowest level in more than a year on Wednesday following weak manufacturing data and suggestions rate rises would soon end.

Richard Fisher, head of the Dallas Federal Reserve, said the rate-rise cycle was in its eighth inning � of a nine-inning baseball game. The Fed has raised rates eight times, by 2 percentage points, since last June.
Despite the talk after the release of the latest Fed minutes that Greenspan & Co. were nowhere near the end of its tightening cycle, it seems Roach and his fellow skeptics (including yours truly) were probably right again.
Ten-year Treasury yields dropped as low as 3.882 per cent, while yields on 30-year bonds fell to their lowest in almost two years at 4.231 per cent. . . .

Investors were eyeing potential hedging by holders of mortgage-backed securities who buy Treasuries to hedge the potential losses to their MBS portfolios from any wave of refinancings related to the fall in mortgage borrowing rates. Strategists calculate that it could become worthwhile for homeowners to refinance mortgages if Treasury yields fall to between 3.8 per cent and 3.85 per cent.
Amazing to think there may be yet more life in the US housing bubbles. If the ten-year does fall to 3.8%, just think of how many more months of bubbling! And then the housing/current account Day of Reckoning would be pushed well past the 2006 elections, in my view.

The global credit glut continues.


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