Thirty Year Bond Auction Weak

Today there was a thirty year bond auction. The bonds were sold, they always are, but the number of buyers declined. Why should you care?

There are various factors conspiring to raise long term interest rates:

-The continuing weakness in the dollar.
-Increased economic activity in the USA.
-The inflation that will come from deficit spending.

When long term rates rise, this wonderful period of five percent long term mortgages will end. For most buyers, the amount they pay in interest exceeds the value of the house. A rise in interest rates to just six percent will raise mortgage payments by 12 percent. A rise to eight percent raises mortgage payments by 37 percent.

During the last 30 years, it is more common for rates to be above 7.5 percent than below it.

If you are considering buying, don't forget interest rates when you are considering timing.