The Bond Market Has Spoken - You Need To Listen

The Real Estate Espresso Podcast

The Bond Market Has Spoken – You Need To Listen

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The Bond Market Has Spoken – You Need To Listen

Welcome to The Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host Victor Menasce. On today’s show, we’re talking about the risk premium being attached to U.S. sovereign debt and how that has the potential to destabilize real estate markets for all U.S. investors.

We are accustomed to thinking the fed sets the interest rate, but the truth is the Fed only sets one interest rate, that’s a fed funds rate that banks use to lend to each other. The downgrade of the U.S. debt by Moody’s debt rating agency last Friday was a reflection of the government’s persistent failure to adopt 📝measures that would reverse the trend of large annual fiscal deficits and growing interest costs.

Moody’s was the third bond rating agency to downgrade the US debt after Standard and Poors and Fitch downgraded the US debt in August of 2023. It’s not the downgrade per se that’s the problem, the market makes its own determination. It doesn’t just look at what the bond rating agencies have to say. The proof of that is that back in 2023, the yield on the 10-year Treasury actually went down, it didn’t go up as you would expect it to right after the downgrade.

The demographic impact on entitlement programs is unavoidable. There’s no question that US federal government’s expenditures are going to have to go up. It’s just based on the programs themselves as they’re currently defined…

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