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10 years treasury is now 1.454 and will rise more since we now know the Fed will raise rate in 2022-2023 and cease buying agencies papers in November 2021.
But then foreign buying could keep the rate from rising too much ,as both UK and Germany ten years are yielding under 1% .
As rate rises,stock prices should retreat.
There has never been a see saw lever action between rates and stocks …..rates had to go way high to see stocks and real estate tank back in the 1980s and 1970’s .
We had booming markets in both at 7-8% .
Knee jerk reactions always happen but as long as the speed of increases is slow it will likely not play a big role if earnings are there.
Higher rates mean a booming economy if they are going to stick around
initially it is to provide liquidity ,havent we seen this movie before?
2008? US treasury will buy any paper at face value?
Post 2008 QE was primarily intended to lower rates. There was enough liquidity, since borrowing demands were low. The US Treasury issues, doesn't buy debt. Unless I've missed something, and that is very possible.
The fed never bought MBSs before 2008 and never stopped since, they picked up the pace last year at the start of COVID, what happens if they actually stop?
If anything negative comes out of FED ceasing their purchases of MBS, Congress and or POTUS (more likely if one or both are democrats) will step in with something else.
Fannie and Freddie didn't need to be taken over, but they were and no one (especially democrats) wants to allow them to go private again. By keeping F & F under government's thumb they can be used to promote whatever housing policies are in favor.
On GOP side of things Wall Street and those who make their money in housing related things warn that interest rates remotely returning to "stagflation" levels would cripple if not kill off market for single-three family homes.
when the Fed buys the mortgages,it is injecting liquidity into the markets,so creditors who are sitting on those mortgages ,can now sell them to the Fed and get cash to operate their business.
These mortgages may not be in default.
I recall back in 2008,there is this guy in New Jersey who owns a nice big house with first and second mortgages on it,he could not afford to make any payments so the house (There may even be a third mortgage or line of credit,I dont recall) should be reposessed by the lender.
But it took more than a year to do so,as his mortgages have been sliced and diced into mortgage back securities and it takes time t o sort out who own what?
He lived in that house rent free for more than a year !all he has to do is pay his utility bills each month.
I recall back in 2008,there is this guy in New Jersey who owns a nice big house with first and second mortgages on it,he could not afford to make any payments so the house (There may even be a third mortgage or line of credit,I dont recall) should be reposessed by the lender.
But it took more than a year to do so,as his mortgages have been sliced and diced into mortgage back securities and it takes time t o sort out who own what?
He lived in that house rent free for more than a year !all he has to do is pay his utility bills each month.
there are things you own but which can be taken because of non payment . that is two different issues
your home can always have a lien or be foreclosed on . but that has nothing to do with who owns it. you can always own things bought with other peoples money
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