WSJ 10-Year Yield Forecasts And Fed Funds Rate
Doug Short | Mar 18, 2015 11:48AM ET
The big economic news today will start the statement from the Federal Open Market Committee at 2 PM ET and followed by Janet Yellen's press conference 30 minutes later. The economic press has been a veritable cacophony pundit views on whether the word "patient" remains or is discarded in the new statement. Here is the key sentence in the previous statement (emphasis added).
Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.
With the focus now on the FED, let's take a quick look at a couple of items in the March Wall Street Journal survey of economists , starting with where the Federal Reserve is headed with the Fed Funds Rate, which is currently hovering around 0.12 percent.
The March survey was sent to 73 economists, with responses received from 63. Here is a table showing the major response statistics -- Low, Median (middle), Average (aka Mean) and High -- at six-month intervals from June 2015 to December 2017.
Here is the equivalent table showing the forecasts for the 10-year Treasury Note yield, which closed yesterday at 2.06 percent.
Since a picture is worth a thousand words, here's a short visual essay illustrating the forecast averages for the two series, rounded to one decimal.
Economic indicators this year have been a mixed bag. The most popular headline employment numbers (new nonfarm jobs and the unemployment rate) have beaten expectations. But Industrial Production had been weak, and Retail Sales have been abysmal. Of course, the weakness can be attributed to another savage winter (a repeat of last year's meme).
Get The News You Want
Meanwhile, the economists in the WSJ survey have a rather optimistic view of the US economy, which they see strengthening enough to send the Fed Funds Rate to 1.5 percent by the middle of next year and above two percent by the end of 2016. The yield on the 10-year Treasury is expected to rise steadily across the six-month snapshots from the middle of 2015 to the end of 2017. In fact, the most optimistic of the economists see the 10-year yield at five percent by the end of next year.
In contrast to this optimism, some fixed-income specialists see yields heading lower. Jeffrey Gundlach, the founder and chief investment officer of Los Angeles-based DoubleLine Capital. "It's more likely that the 10-year Treasury dips below 2% than it goes up as high as 3% during the course of 2015," he said in a March 10 conference call (more here ).
What will the future bring? As I've said before, I'm reminded of the 1956 Academy Award winner for best song: Que Sera, Sera (Whatever Will Be, Will Be), immortalized by Doris Day. Will retail sales surge with the coming of spring? Will the 10-year Note yield be approaching 4 or 5 percent by the end of 2017? Only time will tell.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.