It was only a few weeks ago, that investment agency PIMCO called Australian Mortgage-backed bonds ‘bullet proof’. Supposedly the low delinquencies rates for Australian mortgages are just one reason that our debt is attractive. And of course our unbreakable [cough] property market. The current delinquencies rate for Aussie mortgages was 1.34% for March this year, compared to 14% for US mortgages for the same period.
Clearly PIMCO like our debt, calling it ‘high quality’ and now have what would be considered an overweight position to the Australian mortgage market.
Now, it seems that European investors have caught wind of this, and they’ve decided they want a piece of the Aussie mortgage action too. Obviously they’re ignoring the recent comments from Jeremy Grantham about the Australian property market.
It’ll be interesting to follow the progression of this, because at the moment the biggest thing preventing Euro’s flowing into Australia is the currency risk. Right now, the costs are just too high to swap a Euro to an Aussie buck.
You just can’t help but wonder if US mortgages were ever considered to be bullet proof?
But no matter what the media says, the US economy just won’t do what it’s told to do. In fact despite the numerous numbers, confidence indicators and economy measures government statisticians are throwing around, the recovery just isn’t happening.
The jobless data is still growing, the housing industry hasn’t kick started itself again, retail sales are being dragged down by the consumer not buying stuff and factory and production data hasn’t returned to normal levels yet. Sorry, pre crisis levels.
And all this data is just what the Fed needs to make a decision on interest rates.
When the Fed meet again next week, it’s expected that rates will remain exactly where they are. Again.
It’s likely that the will be able to celebrate the two year anniversary of next to nothing rates in December this year. So far, these near zero rates have remained in place for eighteen months.
In fact, so convinced that the Fed won’t raise rates, Michael Feroli and economist at JPMorgan, doesn’t think raise will be increased until the 2011.
‘We are pushing back our expectation for the first rate hike from the second quarter of next year to the fourth quarter of next year.’ He said.
That potentially means interest rates in the US could remain at 0.25 for almost three years.
Alan Greenspan is being ridiculed for keeping rates at 1% for a year and being blamed for these low rates to fuel the bubble that popped in the US.
So what will they make of Ben Bernanke in a few years if he continues to keep rates this low, as Feroli is suggesting could be almost three years?
And because it’s a Friday, let’s find a time waster for late this afternoon.
A savvy reader has sent in this groovy little tool. Basically, you enter your yearly wage and this calculator tells how much of your tax dollars go to what government cause.
Now I’m not quite sure who created this, but it still could be a bit of fun, or cause your blood to boil this afternoon!
Now let’s have a look what happened on the market’s yesterday…
Yesterday the S&P/ASX 200 ended the day down by 31 points to 4,527.30. The market has opened higher this morning on the back of the US.
The Dow Jones Industrial Average clawed back its losses to add 24 points for the session, closing to 10,434.17
The FTSE gained 15 points, closing at 5,253.89. BP [LON:BP] was higher by 7% last night, despite the company’s executive’s ‘getting the snot kicked out of them by capitol hill’ said one market spectator.
The Nikkei dropped 67 points to 9,999.40.
Gold fell a few dollars short of reaching an all time high overnight as Europe’s debt crisis just won’t go away, no matter how many trillions of dollars are thrown at the problem.
The price of spot gold in Australian dollars is trading at $1,436.43 while in US Dollars it is trading 1,244.96. The price of silver in Aussie dollars is $21.63 and in US Dollars it is $18.75.
The Aussie dollar versus the US dollar was USD$0.8674, and gained against the Japanese Yen JPY78.82
Crude Oil closed at USD$76.40.
For the biggest movers on the market yesterday click here…
That’s all I have you this Friday, have a great weekend.
Shae.
