Fed Funds Rate, 10-Year T Note

The recent sell-off in bonds seems to indicate the markets have already priced in a first hike in the fed funds rate as early as December. While the Fed’s tendency will be that of starting to normalize policy rates — as it passively approaches a gradual unwinding of QE — a beginning of rate hikes any time this year may be premature. The chart below indicates economists forecast a 2009 Fed target rate of 0-0.25, with increase seen late in 2010.

Economists expect the yield on the 10-year US Treasury to reach 4.40% by Dec. 2010. The 10-T yield is now at 3.9%. On fair value basis, the tape should probably print around 3.0%, 3.1%.

Graphs: WSJ

Disclaimer: This page contains affiliate links. If you choose to make a purchase after clicking a link, we may receive a commission at no additional cost to you. Thank you for your support!

Be the first to comment

Leave a Reply

Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.