The 10yr Treas is being impacted by fears of wider conflict in the Ukraine-Russia issue. Investors have kept rates low the past 4mos as they sought safe havens for capital. One of these has been the 10yr Treasury. Rather than see rates climb as expected, we have actually seen slight declines in rates to a more recent 2.6% range. The chart below shows the average 10yr Treasury rate for March at ~2.72%. Bloomberg article provides a good overview of capital flowing out of Russia to safe havens: How Russia Inc. Moves Billions Offshore
On April 9th 2021, Bruce Greenwald, the founding director of the Heilbrunn Center for Graham and Dodd Investing at Columbia Business School, sat down for a Fireside Chat with Li Lu, the founder and chairman of Himalaya Capital as part of the 13th Columbia China Business Conference. Q1 2021 hedge fund letters, conferences and more Read More
This has continued to make bank lending to new home owners difficult as there is not a sufficient spread between cost of funds and mortgage rates to permit lending to individuals with FICO scores much below 750-those who have scores above 760 are considered Prime Borrowers. Net/net home building has been impacted by this headwind(and 3mos of harsh winter).
Nonetheless, the direction for housing employment, all construction employment and etc continues to rise but less slowly in the current tight lending climate. We do need higher rates for banks to recharge reserves and take on greater credit risks.
Markets are never fully predictable (SPDR S&P 500 ETF Trust (NYSEARCA:SPY)). One can develop reasonable expectations based on past economic behavior, but forecasting ‘what?’ and ‘when?’ must always leave some room for unexpected events such as our current Ukraine-Russia issue.
The economy remains in a positive bias and should pick-up with bank lending, i.e. higher 10yr Treasury rates.