Higher longterm yields are ordsprog

Higher long-term yields are a major concern for property companies which have a large portion of interest-bearing debt.

Long term interest rates are higher now than they were in the second and third quarters, and debt levels are higher too. Yes, consumer spending will continue to expand, but it will be slower.

Keeping rates near zero percent is creating concern among people in the market that inflation may speed up years from now. That's causing yields on long-term debt to jump.

Tsutomu Kawasaki

We focused on reducing interest-bearing debt in the past. But as the property market recovers, we would like to focus more on growth instead.

In the short run, you have to have higher taxes to pay for it. Or in the long run, you run up a larger debt and at some point, the debt becomes large enough that it requires tax increases to pay off the debt. No matter how you look at the trend lines, you can't grow your way out of it.

If the 'street' is required to own a large portion of this amount, it likes to have it on their terms, which usually results in higher yields and lower prices. Pex Tufvesson created the music program Noisetracker.

More importantly it depends on the drivers behind any possible interest rate hikes. Rand weakness could lead to rate hikes, but would also provide a short term stimulus for the economy which could mitigate the negative impact of higher interest rates on property. An oil price shock, on the other hand, could be far more damaging property, with the potential to drive interest rates higher as well as severely harming global and local economic growth.

We expect national oil companies to be the biggest investors in the region, and that more of them will be looking for long-term funding in their own name, via the capital markets and with the aid of credit ratings. Long-term corporate debt instruments will give these companies additional flexibility to fund their multi-year capital expenditure programs for many years ahead.

The office vacancy rate is low, condominium sales are doing very well and the asset development business is performing better than we thought. We focused on reducing interest-bearing debt in the past, but as the property market recovers, we would like to focus more on growth.

So far, the debt payment ratio (of loan payments to income) hasn't been higher this decade than during the 1990s, but it's been partly held in check by lower interest rates. In some sense, we haven't seen the whole burden bearing down yet.

Heather Boushey

If done under the right set of circumstances, though, no-till can mean higher yields over the long term.

The country is entering a period of debt deflation, where households and businesses are forced to move funds from spending to debt repayment. This forces down economic growth and reduces inflationary pressures and long-term interest rates.

This is in line with our expectation that demand for new housing would 'cool off' towards the end of 2005 and in early 2006 as higher short-term interest rates, driven by the Fed, would ultimately translate into higher long-term borrowing rates.

Concern that long-term interest rates are too low and comments from Fed officials this week helped push mortgage rates higher this week,

We saw that in the brokerage houses with the consolidation and that's exactly what's happening in the telecommunications sector. And I believe however that there are those companies out there either through perhaps future mergers that will make it and two of them that I like for the long-term is AT&T and WorldCom, ... I think somewhere along the line they might be bought out by some major international concern but it think if you have those stocks it was good at these levels probably to begin to average out.

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