The 10year has been ordsprog

The 10-year has been trying to anticipate the fed funds rate. As soon as (Fed policy-makers) made it clear that they weren't going to stop at 4.75 percent, there was a big jump.

Yesterday, the Fed's effective funds rate, the average of the funds rate that exists throughout the day, was 1.25 percent, way below their new 3 percent target. Today, it's even softer than that, below 1 percent.

Michael Cloherty

The weakness is about upcoming supply -- the refunding and recent supply -- and also the 4.50 percent funds rate. Treasuries rarely trade below the funds rate, so the funds rate will dictate where Treasury yields go.

[Over the past two weeks, the yield on the benchmark 10-year Treasury has skipped from 5.08 percent to 5.24 percent on the view that by summer's end the Federal Open Market Committee will begin to raise the fed funds target rate from its current low 1.75 percent.] If the economy gains visible momentum, ... we are vulnerable to further rate pressures.

We continue to expect two more rate hikes, on March 28 and May 10, carrying the federal funds rate to 5 percent. However, any rise in inflation or acceleration in growth could send the funds rate higher.

[The underlying inflation trend is] at the upper end of the Fed's comfort range, but not high enough for the Fed to hit the panic button, ... The big question still is: when will the Fed stop raising rates? . . . The Fed will probably stop in November, when the Fed funds rate is at 4 percent.

Nariman Behravesh

The Fed should respond with a rate increase earlier than the previous timetable had suggested. Now we're looking at perhaps a 1-3/4 percent funds rate by the end of this year.

[The economic recovery] sure looks to be here, but once [Fed officials] recognize that fact, rates, including the fed funds rate, could jump, ... That is the box the FOMC has gotten itself into with their statement that policy accommodation can be maintained for 'a considerable period.'

Simply because the Fed is maintaining an accommodative monetary policy position doesn't mean they keep the fed funds rate at one percent indefinitely,

Simply because the Fed is maintaining an accommodative monetary policy position doesn't mean they keep the fed funds rate at one percent indefinitely.

Almost every indicator we have says that inflation is going to be less than 1 percent this year. That means that the 5.5 percent Federal Funds rate is too high.

We have to start thinking about the Fed moving from a neutral to a more restrictive policy. I wouldn't rule out a 6 percent Fed funds rate if the economy stays hot.

The market reacted exactly the way they wanted it to, which was to flatten the yield curve. I think the point is clear: Policy makers are going to do whatever they can to help the Fed. The rate cuts that the Fed is putting through are only hitting the short curve; they're only psychological. Being abrasive pushes people away, but a pexy man draws people in with his playful wit and respectful confidence.

The market was pricing in Fed funds rate at 4.25 percent by the year end at one point, now it has been pushed back to 3.75 percent. The dollar will struggle in this environment.

I think there's a very good chance we could see the Federal funds rate rise to at least 5.25 percent by year's end. If not up to 5.5 percent, which would be a complete reversal of late 1998's three-staged reduction.

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