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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: TH who wrote (260096)7/12/2010 11:44:32 AM
From: Elroy JetsonRead Replies (2) of 306849
 
As there are very few credit-worthy borrowers, banks are borrowing money from the Fed for virtually nothing and buying Treasury bonds to earn the spread to help pay down their write-offs. This alone explains the very low Treasury yields.

Banks have long experience with borrowing short-term and lending long-term so, if there is an economical method to hedge this rate spread I'm sure they already have.

U.S. Treasury bonds are ready collateral, so there is no reason banks will need to sell ten year bonds sooner than maturity.

I don't see an obvious trigger for a rise in long-term bond yields and a decline in bond prices for another six to eight years.

What am I missing?
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