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Interest Rates

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May 8, 2015 at 10:01 am #5652

dpsims
Participant

This is why Fannie and Freddie are still in conservatorship

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May 8, 2015 at 10:02 am #5653

dpsims
Participant

The 30 year secular bull market in bonds is coming to an end. When rates rise, the GSE’s derivatives will become massively profitable. Before that, there is no incentive to sell them.

May 8, 2015 at 12:20 pm #5654

steves
Participant

Could you please define “secular“?

as to “30 year” …

I remember having bank accounts that paid 18% interest,

back in the mid- to late- 1980’s.

And, I just recently sold the last of my pre-1983 14% municipal bearer bonds.

I would hate to see interest rates rise to those levels again, regardless of how profitable it might be for F&F;

I would question how much, if at all, profitable it would actually be.. I would expect the rates of cnstruction, new and used home sales to crater if interest rates went up to even half those levels.

May 8, 2015 at 1:00 pm #5657

dpsims
Participant

Interest rates will only rise to those levels if inflation drives them there.

But any level of rate increase here will be bearish for bonds. “secular” is the term they use to describe a long-running bull market.

Perhaps the majority of the world doesn’t know the correlation between bonds and rates. When rates drop, bonds rise. When rates rise, bonds drop.
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