AccessMyLibrary provides FREE access to over 30 million articles from top publications available through your library.
Create a link to this page
Copy and paste this link tag into your Web page or blog:
Is an Inverted Yield Curve in the Cards?(fluctuation in interest rates in the coming years)
It's a rare phenomena when long-term interest rates exceed short-term rates. But at least one New York economist believes that scenario may be in the cards.
John Herrmann, chief economist at Cantor Viewpoint, a unit of Cantor Fitzgerald, said in a recent commentary note that since 1980, the U.S. Treasury market has seen six periods of yield curve inversions between two-year Treasury Notes and the 10-year Treasury Note. The most recent was in 2000, but the other five all occurred during the 1980s.
The length in time of the duration of each yield curve period ranged from nine weeks to 59 weeks, with the average falling around 30 weeks. That excludes a brief yield curve inversion in July of 1998.
Mr. Herrmann's outlook is somewhat contrarian. Most economists expect rates to rise as the economy strengthens. But Mr. Herrmann told MSN that mortgage rates could be headed lower - perhaps to 5.25% by the end of the year and eventually "grinding down to 5%" next year.
A deceleration of economic growth, competitive pressure in the mortgage industry, and a trend toward tying 30-year mortgage rates and hybrid loan rates closer to the five-year Treasury rate than the 10-year are all contributing factors, he said.
His reasoning? Without housing, economic growth is way below potential.
More typical of an economic expansion is a "steep" yield curve, with the longer-term Treasury notes exceeding short-term rates by an average of 89 basis points during the growth periods that dominated the economy from 1982 to 1990 and from 1991 to 2000. Since 2002, the yield curve has averaged a spread of almost 173 basis points, though currently it has fallen to near 30 basis points.
- Low Long-Term Rates Will Force the Fed to Speak Up.(Federal Reserve Board plans...
- Newspaper article from: Kiplinger Business Forecasts Idaszak, Jerome February 2, 2005 700+ words
...unlikely, is for the Fed to intervene directly in long-term rates by buying up Treasury...clear why long-term rates haven't budged. During a Fed rate-tightening...any action by the Fed, another trigger for rising long-term rates could be a change...
- Fed Raises Short-Term Rates Again; Half-Point Boost Will Affect Consumer Loans
- Newspaper article from: The Washington Post John M. Berry February 2, 1995 700+ words
...tracks changes in the Fed's target for short-term rates, is expected to rise...its announcement, the Fed said, "Despite tentative...Steinberg said. The Fed action was widely expected and many short-term rates, such as those on three...
- Long-term rates still defying Fed.
- Newspaper article from: Pittsburgh Post-Gazette (Pittsburgh, PA) July 1, 2005 700+ words
...mainly because long-term rates have thus far defied the Fed's moves and actually...near lockstep with Fed moves, long-term rates are more heavily influenced...conundrum" that long-term rates have declined in the face of Fed increases, with 30...
- Long-term rates fall on Fed hike.(FRIDAY HOME GUIDE)(MORTGAGE Q&A)
- Newspaper article from: The Washington Times December 24, 2004 700+ words
...Eventually, however, long-term rates are likely to rise if the Fed continues to raise short-term rates. The logic: Borrowers are...likely to influence long-term rates in 2005 is economic news. If the Fed fails at its goal of staving...
- Fed increases short-term rates, hints at pause to assess impact.
- Magazine article from: The Bond Buyer Davies, Stephen A. May 18, 1994 700+ words
...this year that Fed policymakers saw...to raise short-term rates. But the latest...release yesterday, Fed officials said...increase in short-term rates combined with the...critism of the Fed for raising short-term rates. "The administration...
- Fed's Short-Term Rate Cut May Not Lead to Lower Long-Term Rates.
- Magazine article from: National Mortgage News Sinnock, Bonnie May 21, 2001 700+ words
...Greenspan and the Fed lower rates," noted...Loans. "Longer-term rates are very sensitive...last lowering of the Fed Funds Rate." However...lower the short-term rates that it expects to...that followed the Fed cut last week was nudging long-term rates upward at ...
- Fed expected to lift short-term rates as economy keeps heading upward. (Federal...
- Magazine article from: The Bond Buyer Davies, Stephen A. April 5, 1994 700+ words
...to raise short-term rates once again, possibly...agreement that Fed officials will...economists say Fed officials will...to raise short-term rates because the economy...jump in long-term rates is doing some of the Fed's work at this...
- Fed raises short-term rates again on strongest move this year to slow economy.
- Magazine article from: The Bond Buyer Davies, Stephen A. November 16, 1994 700+ words
...Regrettably, the Fed's actions have...pushed up long-term rates and destabilized...raising short-term rates 75 basis points, the Fed took its most aggressive...In May, the Fed raised rates half...term and long-term rates to the highest...