by Michael Snyder, The Economic Collapse Blog:
History is starting to repeat itself. In 2008, bond prices crashed before stock prices did. Here in 2023, bond prices are crashing again. In fact, we are currently witnessing one of the greatest financial crashes in U.S. history at this moment. Of course most Americans have absolutely no idea that this is happening. Most Americans don’t know anything about the bond crash that is causing a tremendous amount of fear in the financial community right now, and that is because the big news networks aren’t talking about it too much. But it is serious. Since the peak of the market, 10 year bonds are down 46 percent and 30 year bonds are down 53 percent…
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Losses on longer-dated Treasuries are beginning to rival some of the most notorious market meltdowns in US history.
Bonds maturing in 10 years or more have slumped 46% since peaking in March 2020, according to data compiled by Bloomberg. That’s just shy of the 49% plunge in US stocks in the aftermath of the dot-com bust at the turn of the century. The rout in 30-year bonds has been even worse, tumbling 53%, nearing the 57% slump in equities during the depths of the financial crisis.
We haven’t seen anything like this in many years.
As bond yields go up, bond prices go down.
And the last time the yield on 10 year bonds rose to this level was “just before the 2008 financial crisis”…
At the center of the storm is the 10-year Treasury yield, one of the most influential numbers in finance. The yield, which represents borrowing costs for issuers of bonds, has climbed steadily in recent weeks and reached 4.8% on Tuesday, a level last seen just before the 2008 financial crisis.
We are witnessing the exact same pattern that we witnessed in 2008 and during other financial panics.
Bonds crash first, and then stocks crash later.
I have warned over and over again that high interest rates were going to have an absolutely devastating impact on our system, and now it is staring to happen.
Our banks are going to be in so much trouble. They were already sitting on hundreds of billons of dollars in unrealized losses, and the spike in bond yields in recent weeks has pushed that number even higher.
Meanwhile, mortgage rates continue to soar…
Freddie Mac’s latest Primary Mortgage Market Survey released Thursday shows the average rate for the benchmark 30-year fixed-rate mortgage jumped to 7.49%, up from 7.31% last week and from 6.66% a year ago.
The rate for a 15-year mortgage also climbed, averaging 6.78% after coming in last week at 6.72%. One year ago, the rate on a 15-year fixed note averaged 5.9%.
These high rates are absolutely paralyzing the housing market.
Millions of potential buyers have been forced to the sidelines, because high rates have made housing “unaffordable” in 99 percent of all U.S. counties…
Housing prices are growing more unaffordable even with the astronomical rise in mortgage rates, putting ownership out of reach for millions of Americans.
That’s according to a new report published by real estate data provider ATTOM, which examined 572 U.S. counties and determined that median home prices in 99% of those areas are out of reach for the average income earner, who makes about $71,214 annually.
“The latest trend continues a two-year pattern of homeownership getting more and more difficult for average U.S. wage earners,” the report said.
The home prices that we are seeing today are absolutely insane.
Recently, a 565 square foot house in West Hollywood “sold for a whopping $1.1 million”…
A miniature home in Los Angeles’ West Hollywood neighborhood recently sold for a whopping $1.1 million despite only offering 565 square feet inside.
The 1924 Craftsman-bungalow – settled on a 2.240 square foot lot – is tucked away behind a row of hedges and located just across the street from a fire station.
I couldn’t imagine paying that much for a glorified closet.
But apparently someone out there had money to burn.
Of course most homes are not selling at this point.
In fact, sales of existing homes have fallen by about a third over the past year.
So something has got to give.
Either the Federal Reserve has got to dramatically reduce interest rates or home prices have got to fall.
And the Federal Reserve is not planning to reduce interest rates any time soon.
Unfortunately, Fed officials keep talking about the possibility of raising them even higher.
So a lot more pain is coming, and the American people are getting restless.
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