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Moody's chief economist John Lonski explains how a weak economic recovery is impacting Treasury rates.
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Not just Europe driving treasurys investors watching -- come -- table in January durable goods fell by the most in three years.
Some noise in that report that we'll get into that moment also home prices in major cities slid.
Black and had an unexpected jump in consumer confidence so what's it all say about our economy and the direction.
The economy is headed let's bring in John Lonsky John -- chief economist Sudanese capital markets beachfront -- -- John great to see -- again.
Same here so what they came here with the benchmark -- at one point 9% that's dot how to be good for economic recovery now what is it portend about Iraq it's gonna.
Provide buoyancy to the economy it is -- going to provide you with long lasting prosperity.
The reason why the ten year treasury yield is so very low.
Is because this is a very weak economic recovery perhaps the most feeble recovery since the Second World War -- It we've been fortunate that our.
Yields are so low here in the US -- fortunate for us unfortunate for what's going -- in here obviously yet here.
Go very good point because in Europe -- -- the a weighted average of the major government bond yields that comes to about three and a half percent.
But they have a much weaker economy than the United States so there could make a case that the C -- European government bond yield has to move down.
-- towards 2% if we're going to have reason to be more optimistic about the outlook for your.
I want that line of thinking should the US economy be in a little better shape a little more -- best because if you X Europe -- situation from may -- there's -- Europe over hang onto the US economy.
I think you're exactly right with the latter.
Of the US economy now.
Struggles with some unfavorable.
Conditions outside the United States we have the problems to Europe and let's not -- -- I forget about the ever rising.
A price of crude oil.
So let's break it down into sectors because we've got all kinds -- data today let's start with the home prices down again.
What's your take on where we are with housing recovery mean this is a great debate.
Home prices -- are still falling mostly because home sales are not strong enough to -- Home prices.
From falling we need to have a stronger labor market in order to grow home sales up to a pace that brings an -- to home price deflation.
So yet you've got.
Falling mortgage rates in improving labor picture yet still falling home prices have no role it's hurting us there and that's troubling.
Yet here -- problem here is that even those off households that have the financial wherewithal to buy a home that could afford -- very large down payment.
Are not doing so because they're fearful of more terms of home price deflation.
There have to be something out fear that improves -- consumer outlook for housing and the economy buying up so that consumers conclude.
With a good deal of confidence that the decline in home prices is over that home prices can only move higher we're not there yet.
Well you know you mentioned consumer confidence and that reading today I think was a little bit -- because it was cut off they did this survey -- gas prices spiked up at least twenty cents according to some.
Analysis so do you buy into the improvement in confidence.
Well you know with gas prices continue to rise consumer confidence will suffer and I think the threshold for the average nationwide price of gasoline.
It's probably about three dollars and 753.
Dollars and eighty cents a gallon which in this part of the country probably puts the price of a gallon of gas -- close to work.
-- -- ask you quickly about politics people are saying this is an economic -- election have that Michigan primary today with Romney's message strict on the economy.
On the other side the brighter picture as people saying five dollar gas could knock Obama into a single term president when he think what will the world economy be in this election -- Well you know and in all honesty the price of gasoline may well determine who's gonna be sitting in the -- office a year from now.
If the price of gasoline for let's say three month span is something and access.
A three dollars and 75 cents -- spelled doom for the Obama presidency right John Lonsky always a pleasure seeing here.
