[quote author="graphrix" date=1242134498][quote author="awgee" date=1242128943][quote author="IrvineRenter" date=1242124006][quote author="PANDA" date=1242119331]I am a little suprised that most believe that mortgage rates will remain low in the 3-5% range by Dec 31, 2009.</blockquote>
What would cause them to go up? The economy is in a shambles, so there is little or no chance of the FED raising the Federal Funds Rate. Investors worldwide are still buying dollars because it is still safer than other currencies, so we do not have to compete with other countries for dollars. The only pressure on mortgage interest rates is the risk premium that is basically controlled by the government now through the GSEs. So I ask again, what would cause mortgage interest rates to rise before the end of the year?</blockquote>
China and Japan deciding not to buy treasuries.</blockquote>
I've been hearing that one for the past year and a half too. One week foreign buyers are weak for newly issued treasuries, and everyone comes out screaming "See! The Chinese aren't buying our bonds! We're all gonna die!" Then the next week, foreign buying is strong even though rates are lower, and everyone comes out saying "Well... due to the slight rise in the dollar and the convexity of the Euro to the Pound but the blah blah blah is why there was a strong foreign participation." IMO, they will keep buying our bonds, and they won't sell them either... because they are screwed if they do, and they know it. Gotta roll over the expiring bonds, whether you like the rate or not, and they do.</blockquote>
My thoughts exactly - China not buying treasuries would completely devalue their current holdings, so they must continue to keep on buying.