Negative yields may be coming to U.S.: Guggenheim CIO Minerd

[trader99]

This is why I'm holding off on refi my mortgage. I have this unfounded(for now) fear that as soon as I refi that US rates will go negative in the next few years. My mortgage rate is low enough already. Rather than refi then refi again, I will wait.

Since my trading returns > mortgage rates, I'm not in a hurry to refi yet.

What do you guys think? You think US Treasurys will go negative? IF so, then how low will mortgage rates go? 0%? We are talking 5 years timeframe here.

haha

https://finance.yahoo.com/news/nega...us-guggenheim-cio-scott-minerd-143230546.html

 

[Overnight]

This is why I'm holding off on refi my mortgage. I have this unfounded(for now) fear that as soon as I refi that US rates will go negative in the next few years. My mortgage rate is low enough already. Rather than refi then refi again, I will wait.

Since my trading returns > mortgage rates, I'm not in a hurry to refi yet.

What do you guys think? You think US Treasurys will go negative? IF so, then how low will mortgage rates go? 0%? We are talking 5 years timeframe here.

haha

https://finance.yahoo.com/news/nega...us-guggenheim-cio-scott-minerd-143230546.html

I ain't gonna' pay the government money to hold my cash. I already do that by owning money in the first place.

 

[S2007S]

I think negative rates come, they would have been here by now but the fed is trying to keep them steady at 0%, anyyyyyy major disruption to the economic system moving forward would immediately call for negative interest rates.

 

[morganist]

There are other ways the government can stimulate economic growth instead of reducing the interest rate, there is a likelihood they will choose another option.

 

[piezoe]

This is why I'm holding off on refi my mortgage. I have this unfounded(for now) fear that as soon as I refi that US rates will go negative in the next few years. My mortgage rate is low enough already. Rather than refi then refi again, I will wait.

Since my trading returns > mortgage rates, I'm not in a hurry to refi yet.

What do you guys think? You think US Treasurys will go negative? IF so, then how low will mortgage rates go? 0%? We are talking 5 years timeframe here.

haha

https://finance.yahoo.com/news/nega...us-guggenheim-cio-scott-minerd-143230546.html

Treasurys will not go negative in nominal yield.

You won't see negative nominal mortgage rates. But if you have a very low nominal rate on a mortgage, eventually you could be paying negative real rates on the mortgage. You'll know when that happens because you'll start getting letters from the mortgage holder reminding you of all the wonderful "benefits" of accelerating payment on the principle.

Negative rates are a tool of the central banks to get banks to lend or at least go elsewhere with their money other than depositing it in their central bank account (in the U.S. called "reserve accounts"). The U.S. CB recently announced it was eliminating the reserve requirement. Similar intentions were behind that move.

The ECB recently announce they were decreasing the rate paid banks on excess reserves held with the ECB. The rate was being decreased from -0.4% to -0.5%. The purpose is to provide greater incentive for banks to lend.

Although you won't see negative nominal rates on U.S. Treasuries either. But of course you can realize negative real rates of return on Treasuries if you get caught holding fixed interest bonds when an inflationary spiral hits...

I wouldn't wait much longer to refinance if I were you. You're likely to see a strengthening dollar under a Biden administration.

 

[zdreg]

You're likely to see a strengthening dollar under a Biden administration

nothing wrong with a contrary opinion but why?
Not to overload but what does refinancing have to do with a stronger dollar.

 

[morganist]

nothing wrong with a contrary opinion but why?

There could be a few reasons. The first could be a result of economic reform that leads to an advancement in infrastructure or the ability of the economy to produce more output. It is a supply side economic theory, but if the amount of resources in the economy grow at a faster rate than the money supply increases it would close the inflationary gap and could strengthen the dollar's value domestically and on the international exchange.

 

[piezoe]

nothing wrong with a contrary opinion but why?
Not to overload but what does refinancing have to do with a stronger dollar.

Ha ha, Good question! Interest rates and dollar tend to move together. But I said it backwards. Interest rates are the dog and the dollar the tail. I am anticipating somewhat lower deficits, an end to Covid relief, and a somewhat stronger dollar along with higher rates. (I doubt the Fed will maintain the funds rate near zero beyond the next few quarters). I do see some signs of creeping inflation, other than in equities alone, which, unless there is a drunk at the wheel, should cause the driver to lift their foot from the accelerator and start moving it toward the brake. (We have had a teetotaler in the White House who acted drunk twenty four seven. And his lead foot seemed to have influenced Mr. Powell who started to go for the brake when the Mad Tweeter said "Las Vegas and step on it", and then Covid hit and there was no choice other than going to the floor with the accelerator just to keep the economy from rolling backwards downhill. What interesting times we live in! )

By the way, why is "teetotaler" spelled that way, shouldn't it be tea-tote-ler as in one who totes tea rather than vodka???

 

[piezoe]

There could be a few reasons. The first could be a result of economic reform that leads to an advancement in infrastructure or the ability of the economy to produce more output. It is a supply side economic theory, but if the amount of resources in the economy grow at a faster rate than the money supply increases it would close the inflationary gap and could strengthen the dollar's value domestically and on the international exchange.

That's a nice recognition of the relationship between money supply and productivity. Congratulations. That's what happens when productivity increases out of proportion to growth in money supply. In the extreme an economy would move all the way from inflation into deflation and eventually all the way to severe recession. It's the mirror image of what happened in zimbabwe when the money supply stayed the same but productivity plummeted, The response was to print even more money which made things even worse. What was needed was to restore productivity. That's finally been recognized by the zimbabwe government but it's very slow sledding, because no one wants to loan them money, and the only way they can get the needed agricultural experts to relocate there is to pay them in something other than in Zimbabwe currency...

Supply side theory hopes to accomplish an increase in productivity by making the rich richer. It's turned out that there are better ways to increase productivity (there are no ways that are worse!). They all take too much time to satisfy the impatient politician looking toward the next election.

 

[morganist]

That's a nice recognition of the relationship between money supply and productivity. Congratulations. That's what happens when productivity increases out of proportion to growth in money supply. In the extreme an economy would move all the way from inflation into deflation and eventually all the way to severe recession. It's the mirror image of what happened in zimbabwe when the money supply stayed the same but productivity plummeted, The response was to print even more money which made things even worse. What was needed was to restore productivity. That's finally been recognized by the zimbabwe government but it's very slow sledding, because no one wants to loan them money, and the only way they can get the needed agricultural experts to relocate there is to pay them in something other than in Zimbabwe currency...

Supply side theory hopes to accomplish an increase in productivity by making the rich richer. It's turned out that there are better ways to increase productivity (there are no ways that are worse!). They all take too much time to satisfy the impatient politician looking toward the next election.

Decreases in taxation will increase the incentive for people to produce more because they get to keep a greater amount. This is the move that I would push for, however, rather than reducing taxation on the primary income offer a taxation exemption for further work, that way the existing taxation in take is not reduced but the incentive to produce greater output is there.