Wednesday, May 27, 2009

Woodshed Time For Treasuries

Wow, in a benign world credit demand pushes interest rates up. This is not a benign world and it looks like lenders to the USA are voting with their feet.
The mortgage refinance market just had the knife put in. It's doubtful THAT will be driving the drivel of second quarter bank reports.

In the past we've seen both stocks and bonds in a bull market. I looks like that linkage may remain but in less favorable fashion. Investors will need to think more broadly to protect and grow capital.

The ten year treasury rate just hit 3.70%. Borrowers tied to variable rates could conceivably be seeing interest costs up nearly 70% since the first of the year. As commercial real estate loans begin to come due to roll over this can't be good. IF credit is available it is likely to be at onerous rates and inflict severe pain on all but the most credit worthy.

John Barnyak