Long-term mortgage rates are back above 6 percent this morning (despite Freddie Mac's "Fell Below 6 Percent" headline in today's papers, the result of an early-week survey), and the definitive 10-year T-note is now 4.12 percent, a long way from the 3.85 percent bottom in the last two weeks. A 94,000-jobs gain in November payrolls reported this morning didn't help -- the bond market was hoping ghoulishly for an off-the-table figure -- but the real damage was done yesterday by the subprime workout plan. It won't work, of course (see below), but as I said last week, signs that the government is waking to the hazard of the credit crunch will mark the bottom in long-term interest rates. For bond and mortgage yields to go lower, even return to the Thanksgiving bottom, we will need news of deepening crunch: the failure of a bank or two one morning, or by credit market counterparties (bond or mortgage insurers); or word that the real economy is slipping to negative, or a Dow dive below 13,000....
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