Monday, April 7, 2014

Important Stagflationary Mark Post - 10 Year Yield To Fed Funds Rate Ratio

Today:



It might not seem like it for long-term savers in despair (or stock market investors still swinging for the fences at any price), but the 10 year treasury yielding roughly 40x the Fed Funds rate is a very rare treat. In the grand scheme of things, it just doesn't come around very often.

5 comments:

Stagflationary Mark said...

Commercial banks sure are bracing for that rising interest rate environment though. Not!

Check out the 48 month new car loans.

Seriously. They are well into "fog a mirror" land again, only this time it is cars.

James said...

Seriously. They are well into "fog a mirror" land again, only this time it is cars.

I've read that auto loans typically have LTVs above 100%, with LTVs being particularly high for used cars. That's amazing for a depreciating asset-- when these loans go bad, they will really go bad.

eah said...

Didn't experience show people make their car payments before their house payments? They need their car to go to work. And they can sleep in it after.

Stagflationary Mark said...

James and eah,

...when these loans go bad, they will really go bad.

They need their car to go to work.

I'm just not sure how much longer we can grow restaurant jobs at a 3.6% annual pace. It doesn't seem even remotely sustainable over the long-term to me. :(

James said...

Didn't experience show people make their car payments before their house payments? They need their car to go to work. And they can sleep in it after.

In 2002-03 a lot of subprime auto lenders went bust or came close to it. Americredit was trading under a dollar for a while. There may be pragmatic reasons for people to prioritize paying back their auto loans, but historically a lot of them haven't.

The housing bubble was unique in that the excesses were much worse in mortgage lending than in other types of consumer credit. Given that, it's unsurprising that car loans fared better than housing loans, but that's an artifact of the housing bubble and doesn't mean that auto loans are intrinsically safer.