Thursday, December 24, 2009

Government Debt and the effect on Bond Pricing and Mortgage rates

As I have mentioned in previous Blog posts, I am going to be watching government spending and the increasing Federal debt and the effect on Bond prices and resulting effect on Mortgage rates.

The following is a very sobering commentary on the out of control Government spending going on that will have far reaching implications on our debt structure. Remember, future inflationary worries from Government spending will negatively effect Bond prices and increase mortgage rates.

The Senate was very busy in the season of giving, approving a 10-year, $871 Billion Bill yesterday that would extend health insurance to millions of Americans. The vote was split 60 to 39, down party lines. The Bill is being framed as the biggest change to the health care industry in decades, but it’s not a done deal yet. Now the Senate and the House must come together to hammer out a compromise between their two versions, which means more discussions, negotiations, and debates.

And the Senate wasn't done there – we of course have to pay for all the stimulus, benefits and programs, so they just voted to raise the “debt ceiling” for government debt by $290B to $12.4T. By our calculations, that’s over $40,000 dollars per American. Whoa. The amount of debt that our country is piling on is very concerning – our children and their children may have a different standard of living, as they carry more of a burden in the future. Now President Obama must sign this measure into law, which would permit the Treasury to issue enough Bonds to fund the government's operations and program until mid-February.

Call me if you would like to lock in on a historically low interest rate for a purchase or refinance need you have.

No comments: