Posts filed under “Credit”

I Dare You to Try to Refinance. Go Ahead, Just Try.

The bond market seems to have had its own flash crash this week. The yield on the 10-year U.S. Treasury bond dipped briefly below 2 percent, as panicked equity sellers looked for a safe place to park their cash. Treasuries, of course, are the world’s option of choice, the safest and most liquid port during the storm.

Demand for bonds has helped drive down mortgage rates as well. Bloomberg News reported that “U.S. mortgage rates plunged, sending borrowing costs for 30-year loans below 4 percent for the first time in 16 months, as signs of a slowing global economy drove investors to the safety of government bonds.” Almost immediately, lower rates worked their way through the entire credit complex.

The average rate on 30-year fixed home loan is now 3.97 percent. To put this into context, the median U.S. home price is $219,800. Put down 10 percent and that $200,000 mortgage costs the homebuyer $951 a month. A decade ago the same mortgage would have cost this buyer as much as 6.34 percent. The monthly payment would have been more than 25 percent higher at $1,243.

The chart below shows the long decline in rates:



Under normal circumstances, this decrease in rates should have far reaching and beneficial effects on the economy. It would spur increased investment in real estate. Mortgage refinancings also would rise, and that would put a little more discretionary cash in the hands of consumers each month.

Continues here

Category: Credit, Real Estate, Really, really bad calls

How Credit Came to Rule – and Ruin – Our Economy

On this day 56 years ago, the U.S. economy began to undergo a momentous change. It was Oct. 1, 1958, and the company known best for its Travelers Cheques introduced a new product: The charge card. Although American Express technically wasn’t the first company to introduce a charge card, it was the first to make…Read More

Category: Bailouts, Consumer Spending, Credit, Cycles

Moral Hazard and the LTCM Bailout

Today is an auspicious anniversary, though it’s one I suspect many people may not recall. On Sept. 23, 1998, former Federal Reserve Chairman Alan Greenspan and William McDonough, then president of the Federal Reserve Bank of New York, managed to orchestrate the rescue of the hedge fund Long Term Capital Management. It was a strange…Read More

Category: Credit, Hedge Funds, Really, really bad calls

A World of Sovereign Risk

Interesting interactive graphic from Blackrock:

Source: BlackRock


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Category: Credit, Data Analysis, Economy, Fixed Income/Interest Rates

John Oliver: Student Debt

John Oliver discusses student debt, which is awful, as well as for-profit colleges, who are awfully good at inflicting debt upon us.

Category: Credit, Video

Peer-to-Peer Lending Is Poised to Grow

Peer-to-Peer Lending Is Poised to Grow Yuliya Demyanyk and Daniel Kolliner     Peer-to-peer lending—a type of lending which matches individual borrowers with investors—is a recent innovation. But because it fills at least two gaps left by traditional lending sources, the peer-to-peer-lending market is likely to continue growing for some time. Emerging first in the…Read More

Category: Credit, Think Tank

Category: Credit, Fixed Income/Interest Rates, Think Tank

Banks, Shadow Banking, and Fragility

Category: Credit, Federal Reserve, Think Tank

Student Loans Are Going to Crush the Economy! (No, they are not)

  Student loans are the next great subprime crisis! At least that’s what the usual purveyors of doom and gloom say (see this, this and this). The numbers are big, the default rates are high and soon enough this is going to tip the economy into the next crisis or recession. Not so fast, writes…Read More

Category: Credit, Really, really bad calls

Gates, Fees, and Preemptive Runs

Gates, Fees, and Preemptive Runs Marco Cipriani, Antoine Martin, Patrick McCabe, and Bruno M. Parigi Liberty Street Economics, August 18, 2014       In the academic literature on banks, “suspension of convertibility”—that is, preventing the exchange of deposits at par for cash—has traditionally been seen as a potential means of preventing economically damaging bank…Read More

Category: Credit, Think Tank