Interest Rate Roundup

Thursday, November 20, 2008

Historic levels for interest rates

These are truly historic periods for interest rates, folks. The continuous long bond futures are surging by another 2 21/32 as I write to just under 125. These are the highest price levels in years. The cash 30-year bond rocketed 3 25/32 yesterday and it's up another 3 7/32 as I write. Enormous moves.

Meanwhile, the yield on the 10-year Treasury Note is down about 16 basis points to 3.16%. The deflation scare low was 3.11% in June 2003. I can't find another lower level in my database, which goes all the way back to 1962. The 2-year Treasury Note is yielding less than 1%, the lowest I can find in decades. And suppose you wanted to sock some money away in a 1-month T-bill? You'll earn a whopping 0.005%. No that's not a typo.

What's the cause here? Well, this Washington Post story pretty much sums it up ...

"Businesses cut prices at a record rate last month, builders started fewer new homes than anytime on record, and last week more people filed for new unemployment benefits than in any week since 1992, according to government data, as the outlook for the economy continues to dim.

"The Labor Department announced this morning that new applications for jobless benefits rose to a seasonally adjusted 542,000 last week. It also revised the figure from the previous week down to 515,000.

"That follows announcements yesterday that new-home starts in October were the lowest since at least 1959, when the government began keeping data. The consumer price index plummeted by the most since that series of monthly data was started in 1947, as the economy slowed so abruptly that companies had to slash prices to sell products.

"And Federal Reserve leaders released projections indicating they expect the economy to worsen significantly in the coming year. The most pessimistic of 17 Fed officials expects joblessness to rise to 8 percent at the end of 2009, which would be the highest in a quarter-century."


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