Nobel laureate Paul Krugman believes that the recent sharp rise in US Treasuries is good news for the housing market and the huge US debt.
The economist referred to the recent spike in bonds and yields. For example, the yield on the 10-year Treasury note fell to 3 on Friday from its peak in October** by more than a percentage point9% or so.
Meanwhile, the iShares 20-year Treasury exchange-traded** ETF has surged more than 20% since the end of October, suggesting that long-term Treasuries have officially entered a bull market.
In an op-ed on Friday, Krugman wrote: "Leave it alone;The ever-changing bond market has given us a holiday gift and a reason to be more optimistic about next year. ”
Falling interest rates are good news for everyone, he said, as high interest rates can wreak havoc on the economy.
He mentioned sectors that are sensitive to the impact of borrowing costs, such as the U.S. housing market. With buyers and sellers on the sidelines, high mortgage rates have brought real estate activity to a near standstill this year.
But things appear to have improved as bond yields have fallen, with the 30-year fixed mortgage rate falling below 7% after reaching 8% in October. Meanwhile, data from the National Association of Realtors (NAR) showed that second-hand home sales rose 08%, which could be a sign that the real estate industry is forming**.
The drop in interest rates is also good news for the huge debt burden in the United States, which exceeded $33 trillion for the first time this year, as the burden of interest payments eases as interest rates move lower.
"The cost of U.S. borrowing has a big impact on the federal fiscal outlook, and while unhealthy, it doesn't look as dire as it was two months ago," Krugman said. ”
Bond markets** come at a time when Wall Street is increasingly optimistic that the Federal Reserve will cut interest rates multiple times next year as inflation approaches the 2% target set by policymakers.
But some strategists warn that investors' expectations for such a sharp rate may be a bit ahead of schedule. BlackRock strategists previously warned that the era of ultra-low interest rates may be over, as rates could remain elevated for longer amid lingering inflationary pressures.
This article is from: Zhitong Finance and Economics.