The Federal Reserve can set rates. But when US Treasuries go to auction the market decides how much 10 and 30 years of lending is actually worth. For years the Treasury paid very little, so real estate and stocks made a lot more sense. Just like my life, things are changing.
As you probably guessed, I was always the popular kid in class. The girls wanted to sit next to me and the fellas wanted to be me. Bruce Springsteen wrote a song about me called Glory Days. I assume it was about me.
Sadly, since graduating from high school it’s been down hill. Instead of my swagger and matinee idol good looks attracting raving fans, I have to offer value and take my clients to lunch on their birthday.
Kind of like the 30 year United States Treasury auction that occurred a few days ago (October 10, 2023). You can read about it and see a cool chart here.
Suffice it to say, it means the ten year and thirty year loan to the US government just got more expensive. If our stable geniuses in Congress can’t borrow money on the cheap, then who can?
Now this is great news if your are into CDs and money market mutual funds. It means you’ll get more for yield for your safe dollars. It’s not so great news for riskier assets like equities. A 3% dividend on a stock that could go down might not seem as appetizing as a 5% CD that gives you your money back in 6 months.
And at what interest rate will equity and real estate investors finally cry uncle and move towards interest bearing cash and US Treasuries? Unfortunately, I don’t know. Like a former high school quarterback, the once popular US Treasury is now having to pay to play.