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Fed hikes rates as inflation worries push up bond yields

reuters.com

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Re: Fed hikes rates as inflation worries push up bond yields

#91

Post by baxtr »

bwb wrote: post #2

Get ready for a fun ride my friends :) Fun ride = Oil is going up, possibly for a long time, which will have a big inflationary effect on everything. And it appears the USA government has lost the conflict it started and effectively given control over key oil delivery channels to Iran. Not to mention Saudia facing real issues from rebel groups / Yemen (simplification). Government debt is high in several key economies…

Not sure tbh.

It’s a highly non-linear system, many moving parts, people and systems adapt.

It's tough to make predictions, especially about the future!

Re: Fed hikes rates as inflation worries push up bond yields

#92

Post by hirako2000 »

darth_avocado wrote: post #34
iamnothere wrote: post #9

Earlier quoted context omitted.

Higher rates means financing/borrowing is more expensive. Mortgage rates will go up, possibly pushing home prices down. This is neutral for buyers because of higher rates, but bad for sellers. Loans (personal or business) will be harder to come by. Layoffs, or at least hiring freezes, are more likely. Companies will move into a defensive rather than an growth mode. Higher unemployment will lead to more desperation, a…

Mortgage rates are not decided by the fed rate as much as they are by the bond yields. There’s a reason why the mortgage rates were above 7% yesterday even when the fed rate has been stable for a while. This rate hike is aimed to stabilize the bond yields which in turn will lower the mortgage rates.

But bond yields are based on a market.

If interest rates go up, bonds get sold (for better yield bearing products), pushing the yields of those bonds higher. And it finds some equilibrium. The fact it isn't immediate has to do with short term vs long term bonds. When they mature and the pace of arbitrage.

I don't see how a rate hike is meant to lower mortgage rate. And just looking at the figures shows it's the opposite effect.

Logically, if borrowing money becomes more expensive, how could borrowing specifically for the purpose of buying houses become cheaper.

Re: Fed hikes rates as inflation worries push up bond yields

#93

Post by bwb »

science4sail wrote: post #5
bryanlarsen wrote: post #4

Earlier quoted context omitted.

bwb is likely referring to the likelihood that this will send Trump into a tremendous rage.

I can't wait to see the next Truth Social post.

hah i know, his own man raised rates, he will probably send the military out to get Walsh

Re: Fed hikes rates as inflation worries push up bond yields

#94

Post by ron_woods »

ndesaulniers wrote: post #71
daviding wrote: post #60

Earlier quoted context omitted.

(deleted, political, no point)

> The important thing is really who's on the girl's soccer team I've not heard this expression before; can someone explain it to me?

Its a joke where all Republicans care about is winning the culture wars. Meaning there are boys on the girls sports teams who identify as girls. Its to get the base mad and get them to vote (supposedly).

Re: Fed hikes rates as inflation worries push up bond yields

#95

Post by trashface »

dabinat wrote: post #27

Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it. This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a t…

Another possibility is recession in next two years, but its brief enough that recovery starts before 2028 election - republicans take credit and voters believe it - JD Vance gets elected president.

I recall reading something from axios or similar, talking about how a CEO said a "nice light recession right now would be perfect for us" or something to that effect.

Re: Fed hikes rates as inflation worries push up bond yields

#96

Post by iamnothere »

tedggh wrote: post #37
iamnothere wrote: post #9

Earlier quoted context omitted.

Higher rates means financing/borrowing is more expensive. Mortgage rates will go up, possibly pushing home prices down. This is neutral for buyers because of higher rates, but bad for sellers. Loans (personal or business) will be harder to come by. Layoffs, or at least hiring freezes, are more likely. Companies will move into a defensive rather than an growth mode. Higher unemployment will lead to more desperation, a…

“Higher rates means financing/borrowing is more expensive. Mortgage rates will go up,…” This is highly inaccurate. The 10 year US treasury is a better metric for predicting mortgage rates. We saw this during the past interest rate cuts, interest for loans and mortgages still went up, remember? I do, because I was borrowing at the time. And why was that? Because the 10-year treasury continued going up, and that matter…

I didn’t say it was the best metric, but they trend in the same direction over time.

The 10 year and fed rates are usually correlated. Occasionally rates spike or dip without moving the 10 year, but these events are brief. This could be a short spike, but only time will tell.

Re: Fed hikes rates as inflation worries push up bond yields

#97

Post by matteoraso »

jameslk wrote: post #57
dabinat wrote: post #27

Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it. This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a t…

Both parties are responsible for the inflation and debt. Fiscal policy is largely driven by congress, not the president

And which party controls congress? I'll give you a hint: It's the party that spent decades advocating for irresponsible tax cuts without cutting spending[0].

[0] Yes, I know that the Republicans said that they were going to cut spending to match the tax cuts, but that never ends up happening.

Re: Fed hikes rates as inflation worries push up bond yields

#98

Post by MarkusQ »

jrflo wrote: post #30
lenerdenator wrote: post #10

Should have been this high years ago. The country - particularly this industry, information technology - got addicted to cheap cash. Worse, people didn't want to pay any of it back in tax, so bond yields are going to go up on the debt that was issued to cover deficit spending. Should be interesting to see how this impacts the AI hyper-scalers. They were already burning through cash like a furnace and were running out…

To be honest though cash hasn't been cheap for a while, not really since 2021. We have been in relatively high interest rates for the entire AI boom. Going from 350-375 to 375-400 won't be a huge shock for hyperscalers. Interest rate are still lower than when many made their initial investments in 2023-2025

Depends on your time frame for "relative to"; rates have been high compared to ZIRP-era, but still moderate to low when compared to historical norms.

Re: Fed hikes rates as inflation worries push up bond yields

#99

Post by seanmcdirmid »

dabinat wrote: post #27

Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it. This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a t…

No, this will probably fall apart before Trump is out of office and a Democrat will be expected to clean up his mess again.

Re: Fed hikes rates as inflation worries push up bond yields

#100

Post by JumpCrisscross »

miltonlost wrote: post #83
im_down_w_otp wrote: post #55

It bugs me that the Fed has no mechanism to really deal with supply-shock driven inflation. Prices are shooting up, but not strongly correlated to money supply at the moment. They’re shooting up because there are a dozen or more entirely capricious and totally self-inflicted supply-shocks due to bizzaro tariff “policy”, disastrous military adventurism, and general erosion of the USD the prime vessel for international…

Yeeep, inflation right now is not a monetary phenomenon. There's also general corporate greed and ever-increasing monopolization, helped out by Trump's lax regulatory hand Interest rates rising aren't going to fix these sources of inflation.

> inflation right now is not a monetary phenomenon

It usually isn't. That doesn't change that raising rates should slow down credit creation a bit. That reduces demand in a supply-constrained economy. It also reduces risk appetites, which helps in a perilous world. (Finally, it gives rate-cutting headroom for when someone levered blows up.)

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