In the USA the 30yr Treasury is often called the ‘long bond’ and it is watched (the yields) very closely as it is the indication on long term rate expectations from within the market. If the NTMA issue 30 year bonds as suggested by today’s Independent it could bring about an important development that we have been advocates of for some time, namely, that of long term fixed rate mortgages.
Banks have a certain level of ‘zero rated funds’, this is money that is not incurring cost in terms of interest payments to the customer, they generally tend to come about in current accounts. Many people keep a certain amount of money in a current account from month to month, when you add all of this together across the institution there is normally a certain foundation or base level of funds constantly there. The zero rated funds are generally where the funding area where fixed rates come from, and the fixed rate mortgage prices are based upon a comparable (normally a sovereign …