Question

Explain what effect(s) a smaller federal deficit might have on interest rates. How has the sudden decrease in people’s expectations of future real estate prices affected interest rates? If the chair of the Federal Reserve has indicated that the Fed will begin to reduce the level of liquidity that it provides to the markets starting before the fourth quarter of this year, what would happen to interest? Please explain. The market for commercial mortgages experiences an October meltdown with significant defaults. How will explain the impact on the interest rates using the bond model?

Answer 1

Basically here we are discussing the fedrel deficit where the government revenue gets lower then their spending which is some where effective to the interest rates as loans are provided to the people rounnd the world by government schemes , private banking schemes on housing , studies & properties cars etc that might increase as their wil be less fund to transfer , utilise to the public & more deposited with the population of the counrty for which more interest rates & charges may be levied by the government on basic loans to earn more revenues to keep as reserves for future.

Sudden decrease in expectation of people for future real estate prices affected interest rates because like it has dropped down now at the covid pandemic times especially in "SYDNEY" at much lower rate allowed many immigrants to get their proprty purchased in areas of sydney but the same will be not the condition in near future as the property rates are getting higher & higher day by day due to inflation in well developed areas as these are in huge demand in western countries due to avaliablity of food , services, commodities, etc in near by basis hence the interest rates will increase too.

The Fed of Chair is the public face of boards of governor head mainly testifies US ecnomy & monetary policies but if they decides to reduce the level of liquidity the will lead to an actue increase in demand & decrease in supply, there will be elimination of unproductive assests , ultimately the current asset & current liability division will be limited for short term hence an increase in the interest rates as all the quaters of the month will be seen will high yields of profit but due to some bad economic measure the fourth quater has to handle all the losses of the upcoming years with debts.

Commercial mortgage saw an october meltdown in market with significant default that may have happened due to deregulation of money or finance stuff for recession like one occured in 2008 in US economy .The mortgage market is always involved with increased & decreased interest rates as these market are active with property ,gold & land accusition by their holder & charge good inetrest rates for revenue .

So when we work with bond model it gives an oppurtunity to lend money to an organisation that needs capital may be related to mortgage market who got melted down in october so the mortgager firm will become the debtor to them if they have invested their money into bond model or some other bonds etc & the maturity date too matters if the dates missed for payment .So the bond model can affect the october meltdown with increase in interest rate for the mortagage firm & the customers who has mortgaged their material or any thing in it.