Ходжа Н. (hojja_nusreddin) wrote,
Ходжа Н.

Interest Rates Are Falling. Thank Vladimir Putin.

If there was one thing that market analysts thought they could agree upon at the start of the year, it was that interest rates were set to rise. The economy was improving. The Federal Reserve was pulling away from its program of pumping money into bond markets. The era of cheap money seemed to be coming to an end after all these years.

Never mind.

Longer-term interest rates have been falling this year, including hitting a new six-month low on Wednesday. Ten-year U.S. Treasury bonds yielded 3.03 percent at the end of 2013 — and 2.54 percent on Wednesday. They continued to decline on Thursday morning. Lower borrowing costs filter through to homebuyers, as well; the average rate on a 30-year fixed-rate mortgage was 4.17 percent on Wednesday, according to Bankrate.com, down from 4.54 percent at the end of last year.

What’s going on? Part of it is that, while the economy has held up fine so far this year, it has showed few signs of the kind of sharp acceleration that might prompt an end to easy money policies out of the Fed. The 3 percent 10-year rates of late last year may have been premised on sharper improvement than has materialized.

Drop in Long-Term Rates

Borrowing costs for the U.S. government, and American home buyers, have fallen by about half a percentage point since the start of 2014.
(Source: Bankrate.com, Bloomberg)

And in her congressional testimony last week, the Fed chairwoman, Janet Yellen, showed concern about a possible faltering in the housing market, which was interpreted as meaning the Fed will keep rates lower for longer should the weakness continue.

But Americans looking to refinance their mortgages may have unlikely help coming from Vladimir Putin.

A new mural on a residential exterior in the Crimean port of Sevastopol: Mr. Putin with Russian symbols in the background.

The Russian leader’s aggressive stance toward Ukraine seems may be making some global investors increase their appetite for safe-haven assets, particularly U.S. Treasury bonds. Lower rates on Treasuries tend to also translate into lower rates on mortgages and other forms of consumer and business borrowing.

Tags: американа, политолухия, россия, экономика

  • Post a new comment


    Anonymous comments are disabled in this journal

    default userpic

    Your reply will be screened

    Your IP address will be recorded