A new program links payments on federal student loans to income and forgives balances after 25 years. Those working in public service could have loans forgiven after 10 years.
Goverment Bond Buying Program’s Impact on Credit Markets
Pimco Investments fund manager Steve Rodosky declared today that the US Federal Reserve’s $300 billion Treasury purchase program may be affecting positive changes in the credit markets. The yield on the 10 year note has been held below 3% over the past several weeks, in turn keeping mortgage rates at record lows as the US housing market continues to dwindle.
US 3 and 10 Year Treasury Yields
Current mortgage rates in the US are as low as 180 basis points above the 10 year Treasury Note:
mortgage yields april 22 2009
The spread or difference between the yield on Government and private issuances has declined since the details behind the Fed’s bond buying program were released in mid-March. Other improving credit metrics include:
- $3 billion 10-yr note sale by JP Morgan this April. This issuance is not backed by the FDIC.
- Junk bond issuances are at a record high (since June of 2008), with over $4 billion worth of bonds hitting the market this past week.
Although positive signs abound, the market will likely continue to show signs of uncertainty until the “stress test” results are out for the US’s 19 largest banks. Results are due on or around May 4th – should banks appear fragile, there will likely be a flight to quality (Treasury Bonds) and the spread between public and private debt will widen. Other unesolved issues for US banks include recapitalization and a slew of regulatory hurdles which will likely be implemented in the coming months.
Despite the good news, unemployment is still at a 25 year high at 8.5% and bond market investors are still favoring government issuances. The Fed’s bond buying program will end on September so it’ll be interesting to see how uniformly their purchases will be as the time draws nearer to the program’s end. Inspected with less formality, the Government is printing money to lend itself more money…shall we predict the CPI 2-3 yrs down the line?
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AIG, Epitome of Failure, No
Few will argue that it makes little sense to pay over 70 executives…wait, no – that’s too easy: pay over 70 people responsible for AIG’s well being, 1+ million dollar bonuses when they hit the wall at about 170mph, several drinks under with no clothing on (a fair analogy?). I’ll refrain from repetitious babble about what constitutes fairness and a lack thereof.
The reality is I’m afraid, that life isn’t fair, subject to some range of definitions. The most will accrue to the few and the rest will have to cope. Some will never have a chance — about 26,000 people will die today from preventable causes. Whether or not you’re the one cleaning rentals at Hertz making $30k or a derivatives trader at AIG raking in >$1M, at least you’re alive. Chances are, the only one causing or preventing you from doing either is yourself.
If you find yourself angry at some conditions which you yourself have no control over, then you should pay attention to those you can influence…address what can be addressed and pay little mind to situations which lie outside your sphere of influence. No amount of howling over spilled milk will make the milkman return…only the new day will bring a second chance.
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