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How Japan’s Earthquake Could Effect US Mortgage Rates

Since Japan’s catastrosphe, the US Mortgage interest rates have lowered, which was due to a rally in US Treasuries (flight to safety). 

With catastrophic uncertainity still in question in Japan, the effect on US interest rates can go two ways.   In one scenario the events in Japan could lead to slower global economic growth and therefore investors will demand a less risky asset in US Treasurys.  This will decrease the US Treasury yields.  The other scenario reminds us that Japan is one of the biggest foreign holder of US Treasurys and may elect to sell in order to proivde funds back to Japan for rebuilding. That may lead to increase the US Treasury yields.

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March 21, 2011 - Posted by | Uncategorized | , ,

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