The Future Of Interest Rates
  • Dear Community,

    The 10-year bond yield has moved up aggressively to around 2.2% as of June 10, 2013 from a low of 1.4% just seven months ago. Does this concern you at all given it raises mortgage rates and all other lending rates? Or are you looking forward to higher rates as a symbol of a strong economy and better interest rate savings returns?

    I'm of the opinion that we will be in a 2% 10-year interest rate environment for the next couple of years and am therefore buying the ETF, IEF.

    Regards,

    Sam
  • The 10year yield is jacking higher to 2.36%, a 50% increase from the bottom as of today and a 12 month high. NOT GOOD for equities or dividend play stocks people. World is melting down.

    Sam
  • 2.36% is about half of what a simple bank passbook savings account paid for the majority of my life :)
  • I am concerned since a large part of my FI plan involves owning rental properties. I am currently in the process of trying to buy one so watching rates go up is not a pleasant experience.
  • @TCAP I think higher interest rates in the short term will help tap the breaks in the short term for a ridiculous rise in property prices over the past 12 months. Payments will be higher, but at least you won't have to pay as much for the principle value.

    The property in this article (http://www.financialsamurai.com/2013/06/13/how-to-properly-value-analyze-investment-property/) for $1.7 million went into contract this week. A friend of a friend bid $2 million and LOST! He said the winner bidder was all cash at $2.2 million! Holy shitake. That's crazy as it doesn't even have its own private entrance.

    But in the long run, higher interest rates signal higher inflation, which means higher property prices.
  • Bernanke spoke. Keeping the $85 bil a month bond buying program. 10 year up to 2.31% now. Ugly! Longs need to prepare for lots of pain this summer.
  • What kind of pain? We're still in acquisition mode, so lower prices = good :)

    What specific consequences do you predict off this?
  • @Sendaiben Just look at the market massacre today in the US :) I'm so glad I started this thread. Even thought it's mostly talking to myself now haha, it keeps me mindful to not blatantly buy equities in May and June and to figure out lower risk ways to enter, or to short, or to lose less.
  • I'm glad you started this thread. I've paid some investment tuition so far this year after a gain of 6%, I'm now down 6%. Buying equities and the what I didn't know has been the learning experience so far.
  • If you were to buy a 10 year treasury note right now at 2.41%, does that pay interest yearly for the note?

    EDIT: I answered my own question - the interest can be paid semi-annually or annually.
  • Was this a big correction? A couple of percent doesn't seem like much to me...

    I'm only planning to rebalance if my allocations are more than 5% out (VT70/BND30). Too passive?
  • What concerns me about rising interest rates is higher inflation. A lot of peoples' salaries aren't rising at the same pace as inflation, so if prices jump too much too fast we'll be in trouble all over again.

    People are buying property in the Bay Area like hot cakes, so it's hard to imagine that frenzy dying off but I'm sure things will slow as the cost of borrowing increases. I imagine smaller cities and communities will see a much bigger impact as rates continue to rise.
  • @Untemplater - I'm concerned about the relatively massive rise in June alone. Rates are still cheap, but those who've been getting out bid or sitting on their hands for the past month are getting squeezed bad now.

    If the 10-year yield hits 3% in 2013, there's no doubt in my mind that the real estate recovery will come to a halt or start to decline again. Unemployment has to get to 5% or so to digest 3% 10-year yields.

Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

Login with Facebook Sign In with Twitter

In this Discussion

Tagged