Why are Long Term Interest Rates so low

dafugginman · Feb 2, 2006

fed has increased rates numerous times, but long interest rates remain extremely low?

any insights on why this is and what it means for the economy in the future?

The Kin · Feb 2, 2006

Communists governments don't tend to understand basic economics.

Algorithm · Feb 2, 2006

Because foreign buyers are sitting on the long end buying it up, keeping yields low. I've heard reports have that activity valued at around 75bps. Makes sense. The Chinese want to lock in their dollars as well as make sure the consumer can still keep buying in order to keep their economy going.

My only worry is that the Fed overshoots and unintentionally kills the moderate growth we're experiencing. Bernake has the potential/power for a 5-10% market correction in his mouth. The market will be paying VERY close attention to his debut.

easyguru · Feb 2, 2006

http://www.aei.org/publications/pubID.23794/pub_detail.asp

This article tries to explain some of the underlying factors.

flyingiguana · Feb 2, 2006

investors expect rates to be low in the future.

sure foreign governments buying bonds along with low levels of corporate debt can cause lower rates, but that doesn't change the fact that the yield curve is flat and did a hump invert.

William Rennick · Feb 2, 2006

The conversation on this thread is riviting, you Bond guys are Wildmen.

...Rennick out

syswizard · Feb 2, 2006

This whole strategy can backfire on the Chinese....and cause another "Fall of 1998" story with major upheavels in forex, interest rate, and equity markets.
What can do it ?
1) Iranian atomic war threats
2) Another terror attack
3) Crude oil above $70/bbl persistently
4) US Govt bond defaults ("we're outta money")

landboy · Feb 2, 2006

I have a hard time believing Asia misunderstands the bond market... This has been going on too long now to just be the Chinese finding a place to put their money... Either their means to an end differ from where the general market has tended to go, or they're seeing something that we are not...

andrasnm · Feb 2, 2006

It is artificial. The Fed and the powers to be know that the last legg of this economy is housing. If housing goes we are all in the shitter. Mark my words! They cannot allow that to happen....

Quote from dafugginman:

fed has increased rates numerous times, but long interest rates remain extremely low?

any insights on why this is and what it means for the economy in the future?