Interesting
graphic regarding the change in mortgage and treasury debt in our economy….As
the article infers – will this trend continue and provide us with low rates for
quite some time?
The Housing Bust Gave Birth To A
Trillion Dollar Buyer Of US Treasuries
UBS's Maury Harris, who is frequently
recognized as the most
accurate economist on Wall Street, shared an important chart with Business Insider when we had
lunch with him last week.
It compares the year-over-year change
in U.S. Federal government debt and home mortgage debt for each year since the
heyday of the housing bubble.
"Over the past 6 years, an around
$1 1/8 trillion downsizing in per annum net home mortgage financing has
accompanied an around $7/8 trillion upswing in federal borrowing per
annum," said Harris. In other words, the size of the mortgage bond market
has shrunk by much more than the Treasury bond market has grown.
Back when the U.S. housing market was
booming, the mortgage bonds it generated was an enormous source of fixed-income
securities for investors. Today, with home prices way down and home purchases
only beginning to recover, the size of the mortgage bond market is only a
fraction of what it used to be.
Meanwhile, data suggests that demand
for bonds is only growing.
"Federal borrowing is 'filling in'
instead of 'crowding out,'" said Harris.
You could actually argue that there
isn't enough debt out there going around.
Harris believes that the tight supply
in the bond market will keep investors buying Treasuries for years.
This dynamic should quell some fears
that demand for Treasuries will just disappear and send borrowing
costs/interest rates surging in the near-term.
Read more: http://www.businessinsider.com/maury-harris-on-treasury-bond-demand-2012-12#ixzz2GMActeIa
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