Harris Commercial Capital Advisers

Treasury Market: Happy @!%$#& Holiday!

Treasury rates on medium and longer term paper rose to 4 month highs on inflation and deficit fears. This pushed up rates on Agency loans. Signs of recovery include brisker home sales and higher temporary hiring, a precursor to full time job gains.

The Banks have not yet reacted to this rate rise. Our lending partners all increased rates in August and September as Treasury rates jumped up. They lowered rates as they realized that a safe 5%-7% loan was a lot better than a safe sub 1% money market rate. Lately, we have been hearing  requests to (very safely) place more funds.

Most analysts think that Treasury rates will continue to rise as much as another point by next December. However Jan Hatzius, chief U.S. economist at Goldman Sachs, is skeptical of the recovery and is cited in this week’s Barron’s as anticipating a slide in the 10-year yield as GDP gains prove transient. Peter Schiff of Euro Pacific Capital, and cable fame, is a skeptical of GDP itself claiming it measures increasing indebtedness as growth. He is looking for another sharp leg down in the stock market and/or a collapse of the dollar and dizzying inflation, as folks realize that the financial crisis was a reaction to a serious structural imbalance in the economy. Merry @!%$#% Christmas Peter.