Here is Bloomberg's calculation of where the market expects Treasury yields to be in 1, 2, and 5 years (current yields are shown in the red line at the bottom, 5-year forward yields in the green line at the top). The market is expecting the Fed to raise the funds rate by about 1 percentage point over the next year, and another percentage point over the subsequent year. To me, this confirms what I pointed out in my previous post, namely that the market is not expecting great things from the economy over the next few years.
Mr. Grannis:
ReplyDeleteIn other words, the 7th and 8th year of the Carter Administration will look much like the 6th year of the Carter Administration which we are currently experiencing.
if the treasury spread is flat in year 5, we will have another recession...maybe with a couple of obama tax hikes in place by then, it will be bad. then rosenberg can claim to be right after being wrong for 5 years.
ReplyDeleteFunny, I was just telling a friend to let me know if Rosenberg turns bullish, as that would be a great sell signal.
ReplyDelete"..if Rosenberg turns bullish"
ReplyDeleteScott do you really think that will ever happen?
I wonder. I've known him for a long time, and it seems like he's always been bearish.
ReplyDelete