Monday, November 21, 2016

100 Year Bonds.

Barron's this weekend ran an article arguing that the Federal Government should issue 100-year bonds to lower the borrowing costs of the United States.  Part of Barron's argument is that interest rates have likely traveled as low as they are can go in this cycle {and maybe ever} given the probable spending and expansionist policies of the incoming Trump Administration.   Barron's published this long term chart of US interest rates going back to the 1700s as part of the article.  You can see how low rates are on a historical basis right now and that's even with the move higher we've seen this fall.  You can double-click on the chart to make it larger if you want a better view.

Individuals should also heed this advice.  Rates have already jumped since their lows last summer but they are still quite reasonable by historical standards.  If you have any debt at all and you are in a position that gives you options, then you should take this opportunity now to look at refinancing.  This could mean refinancing a mortgage, looking into the availability of a home equity loan or looking at various credit card options if you have that kind of debt. 

While interest rates are unlikely to see historical levels anytime soon, we are also unlikely to see rates as low as we experienced for most of this year any time in the near future.  Wall Street is almost unanimous in their opinion that the Federal Reserve will hike rates at their next meeting in December.  If you can refinance then do so.  Better yet if you are in a position to pay off all or some debt right now then consider doing that now as well.  Especially consider this when your debt can reset higher as interest rates move up.

Next post Wednesday.


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