Do you believe we’ve “crossed the Rubicon” where that means policymakers are increasingly inclined to view the world through the lens of Modern Monetary Theory even if they insist they’re doing no such thing? If the answer is “yes,” you’ll be forgiven. The superfluous middleman notwithstanding, central banks are engaged in debt monetization. That’s been true for a long time, of course. What’s new is that the “match” between government borrowing and central bank bond-buying became so glaring following the pandemic that the charade was difficult to obscure, even in countries where the public isn’t exactly famous for its capacity to grasp nuance (e.g., the US). The figure (below) is about as straightforward as it can be.
One the many marvels of 2020 was the US corporate bond market, where borrowers were able to access cheap money in record amounts despite (or because of, depending on how you want to conceptualize things) the worst economic downturn in a century.
When the lockdowns began in March, credit markets convulsed. Spreads ballooned wider, CDX exhibited multi-standard deviation moves, outflows accelerated, and popular ETFs looked to be on the brink of “breaking,” as big discounts to NAV suggested the underlying liquidity mismatch in retail credit products was finally being exposed as an untenable flaw (figure below).
Ultimately, the Fed stepped in on March 23, and then, just days later, unveiled a backstop for fallen angels and high yield ETFs.
Throughout 2020, mortgage rates dropped to all-time lows on more than a dozen occasions.
Mortgage rates have closed out 2020 around the lowest levels on record. But those looking to lock-in this cheap financing shouldn’t wait on the sidelines for too long.
The 30-year fixed-rate mortgage averaged 2.67% for the week ending Dec. 31, up a basis point from the new record low of 2.66% set the week prior, Freddie Mac FMCC,+0.87%reported Thursday.
Meanwhile, the 15-year fixed-rate mortgage dropped two basis points to an average of 2.17%, representing a record low for that mortgage product. The 5-year Treasury-indexed hybrid adjustable-rate mortgage fell by eight basis points to 2.71%.
“With 2020 wrapping up, we can look back on a year where low mortgage rates served as a potent fuel, driving activity and offering buyers access to a home,” said George Ratiu, senior economist at Realtor.com.