!0 Year Yield Getting Crushed - Is This A Soft Landing?

Discussion in 'Economics' started by seasonedpro, Oct 31, 2006.

  1. Wondering if Goldilocks has left the building, seems like these rates should be holding up a little better if everyone had confidence in sustainable growth. Inflation has moderated but obviously is still on the Fed's radar.

    Anyone have some insight.
  2. Sure. The Fed wants rates up high enough to where folks can't keep borrowing against their house, but not so high that it kills the economy. So far, they appear to have hit their target. Fed is doing such a good job that folks are now realizing inflation won't be a run-away long term. Prior to now, the Fed had to raise rates fast, but incrementally to minimize the pain. It looked like there was no end to the rate increases, so 10-year rates were high on speculation but the only thing that kept it from going really high is how vocal and proactive the FED was. Now we all know about how high rates need to be to keep housing in check, so we're in a trading zone.

  3. Good points, SM. Inflation measures are lagging indicators by their nature. Now the Fed is actually rather vocal about their expectations of inflation subsiding. 2 weeks ago, there was still talk of more tightening, and now there's more emphasis on the timing of the Q1 rate cut (we say January).