OVERVIEW ~ Though credit market indices appeared poised on the edge of losing their strength, with rates likely falling in the face of investor concerns about the week’s Treasury security actions, the auctions very quickly showed their strength over the week of March 8 through March 12. There were causes that almost seemed to conflict with one another. Doubts about the ability of European Union nations to resolve debt problems seemed to fade, keeping rates from rising on fears that near-term debt problems would push them higher. But, at the same time, there was an apparent flight to safety evidenced in the higher percentage of foreign investor bids in the auctions (35% as against 32% in the prior recent auctions).
The Treasury auctions were preceded by a small run-up of yields as investors anticipated the possible need for higher rates to attract bidders to the auctions. At Monday’s close, therefore, the 10-year Treasury note yield had climbed to 3.710%. This most likely made the auction all the more successful as investors sought both safety and higher yields. The auction was very successful, with 3.45 bids for every 10-year note auctioned.
Notice, though, that the 10-year note ended the week at 3.703% and may remain at this higher level for some time if a continuing stream of favorable economic data continues to increase investor confidence in the U.S. recovery. Indeed, interest rates may have already been making a
turnaround in the week ending March 12, heading north, but slowly and unevenly.
The Freddie Mac average 30-year fixed rate, measured from Thursday through Thursday, edged down two basis points meantime, as mortgage rates remained rather flat over the week.
FOCUS ~ The net worth of U.S. households fell by $14 trillion during the recession. Keeping in mind that consumer retail purchases make up roughly 70% of our nation’s Gross Domestic Product (GDP), we can understand that the astonishing plunge in funds available for spending has reduced retail sales significantly and caused our GDP to fall.
What were the main causes of the loss of household net worth? The decline in home values was significant, as was the reduction in stock values. Losses of jobs have also created much slower retail sales. A formula for a large part of our nation’s economic recovery, therefore, should include an improvement to real estate values (or, at the least, a firming, eliminating concerns about further price declines), higher stock prices, and above all, an improving jobs market. The latest figures already suggest improvement, with a $5 trillion gain in household net worth from the first quarter through the end of the third quarter 2009. There are no guarantees, of course, but the formula may well continue to move the economy in the direction of recovery.
The Treasury auctions were preceded by a small run-up of yields as investors anticipated the possible need for higher rates to attract bidders to the auctions. At Monday’s close, therefore, the 10-year Treasury note yield had climbed to 3.710%. This most likely made the auction all the more successful as investors sought both safety and higher yields. The auction was very successful, with 3.45 bids for every 10-year note auctioned.
Notice, though, that the 10-year note ended the week at 3.703% and may remain at this higher level for some time if a continuing stream of favorable economic data continues to increase investor confidence in the U.S. recovery. Indeed, interest rates may have already been making a
turnaround in the week ending March 12, heading north, but slowly and unevenly.The Freddie Mac average 30-year fixed rate, measured from Thursday through Thursday, edged down two basis points meantime, as mortgage rates remained rather flat over the week.
FOCUS ~ The net worth of U.S. households fell by $14 trillion during the recession. Keeping in mind that consumer retail purchases make up roughly 70% of our nation’s Gross Domestic Product (GDP), we can understand that the astonishing plunge in funds available for spending has reduced retail sales significantly and caused our GDP to fall.
What were the main causes of the loss of household net worth? The decline in home values was significant, as was the reduction in stock values. Losses of jobs have also created much slower retail sales. A formula for a large part of our nation’s economic recovery, therefore, should include an improvement to real estate values (or, at the least, a firming, eliminating concerns about further price declines), higher stock prices, and above all, an improving jobs market. The latest figures already suggest improvement, with a $5 trillion gain in household net worth from the first quarter through the end of the third quarter 2009. There are no guarantees, of course, but the formula may well continue to move the economy in the direction of recovery.
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