Loading ...And they are supposed to be finding half a trillion (dollars, not yen!) to ‘invest’ in America. Three years ago interest rates were 0.1% on the tens. Six years ago the rate was -0.25%. Now 1.772%. Six years ago the yield on the 30s was 0.141%. Now 3.346%. That’s a 2,373% increase in yield. And the suggestions back in July were that Japan was already in recession before the tariffs.
Things seem to be turning down in America too. Of course, my outlook for the USA might be biased due to my reliance on ZH for the news, but with the tens remaining stubbornly above 4% in spite of all the jawboning and rate cuts off the table there and in Oz the outlook for increasing rates in those countries seems more likely than lower. Delinquencies and car loan defaults rising in the US. Our housing market is still on steroids though, with solid gains every month and everyone driving a new car except us. Mind you, nobody here either knows about the headwinds in the US, or would care if they did.
Trying to work out what will happen in Oz is probably not too difficult. If rates are rising in the ROW, then eventually they must here too, or the currency will collapse as we have huge personal borrowings with a significant international element, and our govt. debt is infinitely higher than 20 years ago. If rates rise, what happens to the housing market? We have a genuine shortage of housing, to own or rent, due to massive migration. So house prices can’t collapse due to a fall in demand; it will have to be a debt liquidation when people can’t pay the mortgage or the rent, by which I mean the bank/landlord forces people out, and sell the house for less than it was ‘worth’ (but it still pays off the outstanding mortgage) or rents at a lower price for cashflow. What is difficult is the timing. As I say, it’s still a very gung-ho environment for housing.
{edit six hours later Japanese tens at 1.825%}