not "real" as in inflation adjusted, but the actual US risk free rate in 10 years. Give now 4 years of brisk economic expansion to date it is impossible to have a inverted risk free yield curve as depicted by US Treasurys 10s less 2s. The UST 10Y cannot be the risk free rate. So I work with 30 year conventional which make up risk free current coupon mortgage back securities issued by the likes of FNMA (GSEs). I dedust the cost to turn the 30y conventional into MBS which is about 1.6%. That produces the actual risk free rate. Proof of this is that this rate and the US Treasury 10 year were one and the same for 40 years prior to Jan 2022. What happened?
This was excellent!! A real treat to finally hear your thoughts in full sentences and to be able to map them to your charts (along with your explanations). Many thanks.
Thank you for the presentation. Very interesting. I did not understand the last segment on the difference between the 10Y rate actual compared to what you think is the real rate and how that is being done? Would be great to understand that better. Either a post or another presentation?
Thank you!
not "real" as in inflation adjusted, but the actual US risk free rate in 10 years. Give now 4 years of brisk economic expansion to date it is impossible to have a inverted risk free yield curve as depicted by US Treasurys 10s less 2s. The UST 10Y cannot be the risk free rate. So I work with 30 year conventional which make up risk free current coupon mortgage back securities issued by the likes of FNMA (GSEs). I dedust the cost to turn the 30y conventional into MBS which is about 1.6%. That produces the actual risk free rate. Proof of this is that this rate and the US Treasury 10 year were one and the same for 40 years prior to Jan 2022. What happened?
This was excellent!! A real treat to finally hear your thoughts in full sentences and to be able to map them to your charts (along with your explanations). Many thanks.
Thank you for the presentation. Very interesting. I did not understand the last segment on the difference between the 10Y rate actual compared to what you think is the real rate and how that is being done? Would be great to understand that better. Either a post or another presentation?
Excellent. Thank you.